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A Reference for Pricing FX Options with American Barriers

Article Quant Q&A · Author: Candidate
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Summary

The document concerns the pricing of foreign-exchange options with American-style barriers. The question contrasts closed-form formulas for European barrier calls and puts with the apparent lack of comparable guidance for American barriers. The response points readers to a chapter of a specialist FX derivatives textbook as a source covering the topic.

This is a signpost to further reading, rather than a pricing explanation. It does not describe a model, numerical procedure, assumptions, or example values, and it presents no evidence for a particular method. Readers seeking to price these contracts would need to consult the cited book chapter for the actual treatment. The brief answer does not clarify which types of American barrier features or pricing frameworks the chapter addresses.

Key ideas

  • The document identifies American-barrier FX options as a pricing topic requiring further reference.
  • It directs readers to a chapter in a specialist FX derivatives textbook.
  • No pricing formula, model, or numerical method is explained in the document.

Tags

ForexOptionsDerivatives pricing
Full text
# Premium of FX Option with American Barrier


# Premium of FX Option with American Barrier












I have been trying to understand how to price FX options with barriers. In Hull (Options, Futures, and Other Derivatives), there are closed formulas how to calculate the premiums of European Call and Put options with barriers. However, I am not able to find either closed formula or a model of computing the price of FX options with American barriers. I am not experienced with pricing of FX options, so I apologise if that seems to be an elementary question.

Could anyone please advise where I can read or find more information?

Thank you in advance!

## Answer by user42108 (score 0)

https://quant.stackexchange.com/a/59690

Chaper 24 of the book "FX Derivatives Trader School" (much better than you might think from the title!) covers this topic.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.