CLASSIFICATION AND IMPORTANCE OF BARRIER OPTIONS

Abstract

In the present paper we explore pricing of continuous and discrete barrier options that become more and more popular because of lower costs than their plain vanilla counterparts. We briefly describe different kinds of barrier options and their importance in Finance. Our financial analysis and the respective mathematical formulation give the possibility to be invented efficient computational methods for valuation of path-dependent derivatives that have not only a simpler computer implementation but also differ with minimum memory requirements and extreme short computational times.