• David Lee deposited American Barrier Option Model in the group Group logo of Scholarly CommunicationScholarly Communication on Humanities Commons 4 months, 3 weeks ago

    A model is presented for pricing an American call option on stock. The option tenor is n years, and its strike price is increased every anniversary. It has also the following feature: if the stock price stays in excess of 200% of the current strike price during 10 consecutive trading days. The seller can issue a notice to the buyer that one half of all remaining unexercised options will expire in 30 days. Such a notice can only be issued once. The result of the notice will be an exercise by the buyer of at least a half of the option being held within 30 days. The buyer may continue to hold the rest till the originally set expiry date.