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Rise
10-29-2007, 11:29 PM
Why a down-and-in call with barrier less than strike price is not zero?

According to Hull, he gives a formula in his book.

sleddogg83
10-29-2007, 11:34 PM
The down and in barrier only makes the option qualify for a payout (based upon the relation of the ending price to the strike). The barrier merely has to be met at any future time and not necessarily at the time of expiry of the option.

A necessary but not sufficient condition for a payoff.


Edit: typos

Rise
10-31-2007, 11:03 PM
The down and in barrier only makes the option qualify for a payout (based upon the relation of the ending price to the strike). The barrier merely has to be met at any future time and not necessarily at the tune if expiry of the option.

A necessary but not sufficient condition for a payoff.
Thanks for the help. After reading it twice, I figured it out.