10. Suppose an option knocks in at H1> S, and knocks out at H2 >H1. Suppose that...

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10. Suppose an option knocks in at H1> S, and knocks out at H2 >H1. Suppose that K

H1, it is not possible to hit H2 without hitting H1):
Payoff =
⎧⎨
⎩
0 if H1 not hit max(0, ST
− K) if H1 hit and H2 not hit 0 if H1 hit and H2 hit What is the value of this option?

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Derivatives Markets Pearson New International Edition

ISBN: 978-1292021256

3rd Edition

Authors: Robert L. Mcdonald

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Question Posted: Jul 22, 2024 09:00 AM

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10. Suppose an option knocks in at H1> S, and knocks out at H2 >H1. Suppose that...

Question:

H1, it is not possible to hit H2 without hitting H1):Payoff =⎧⎨⎩0 if H1 not hit max(0, ST− K) if H1 hit and H2 not hit 0 if H1 hit and H2 hit What is the value of this option?

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Derivatives Markets Pearson New International Edition

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H1, it is not possible to hit H2 without hitting H1):
Payoff =
⎧⎨
⎩
0 if H1 not hit max(0, ST
− K) if H1 hit and H2 not hit 0 if H1 hit and H2 hit What is the value of this option?