Greeks: barrier up-and-out

[amir]

hi guys
does anyone know the formula for DELTA in the barrier up-and-out?
thanks

 

[MRoss]

" Delta at the barrier is discontinuous and therefore problematic - in vanilla Black-Scholes, Delta changes regularly and changes in Delta indicate the amount of the underlying to trade. A discontinuous Delta means a sudden offload or onload of the underlying."

http://www.mysmu.edu/faculty/chonghuitan/QF303/QF303L9.pdf

 

[Aditya Chitral]

hi guys
does anyone know the formula for DELTA in the barrier up-and-out?
thanks

If you are looking for hedging of barrier options you might want to look into barrier shifts for smoother profile near barrier.

 

[amir]

If you are looking for hedging of barrier options you might want to look into barrier shifts for smoother profile near barrier.

I didnt get it! I need the exact formula to compare with my MC results

 

[DominiConnor]

Oddly up until this very moment when I read this post, it had never occurred to me that risk is modelled in terms of Greeks, which to me is ironic.

 

[dstefan]

Indeed!!!

 

[Aditya Chitral]

I didnt get it! I need the exact formula to compare with my MC results

Perhaps my answer was not quite what you were looking.

In any case, you can read more about barrier shift here. Page 58 of the book.

 

[amir]

Oddly up until this very moment when I read this post, it had never occurred to me that risk is modelled in terms of Greeks, which to me is ironic.

Does that mean that my question was so stupid?
It was an assignment and my first time doing numerics for greeks

 

[financeguy]

Does that mean that my question was so stupid?
It was an assignment and my first time doing numerics for greeks

haha priceless
no its not a stupid question

 

[quotes]

If you have the analytic solution, I guess you could differentiate it with respect to S