A Continuity Correction for Discrete Barrier Options

Posted by Chun-Yuan Chiu & Fred


Initial underlying asset price
Strike price
Time to maturity Years
Interest rate of domestic currency(annulized)
Interest rate of foreign currency(annulized)
Volatility (annulized)
Number of partition
Knock-in or knock-out
Price of Call Option:
Price of Put Option:

The calculation is based on the Black-Scholes model. By applying a continuity correction, the pricing formula of continuous barrier options becomes an approximation to discrete barrier options with remarkable accuracy. The continuity correction is given by Broadie, Glasserman & Kou (1997).

Keywords: Discrete barrier option calculator, FX, Foreign exchange derivatives

 •  Apr 26, 2014  • 

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