Suppose an option knocks in at H 1 > S , and knocks out at H 2

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

K < H2 and the option expires at . Call this a "knock-in, knock-out" option. Here is an equation summarizing the payoff to this option (note that because H2> H1, it is not possible to hit H2 without hitting H1):


What is the value of this option?

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Derivatives Markets

ISBN: 9789332536746

3rd Edition

Authors: Robert McDonald

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