NINST-by-1 vector
of strike price values. Each row is the schedule for one option.

Settle

NINST-by-1 vector
of Settle dates. The settle date for every barrier
option is set to the valuation date of the stock tree. The barrier
argument Settle is ignored.

ExerciseDates

For a European option (AmericanOpt = 0):

NINST-by-1 vector
of exercise dates. Each row is the schedule for one option. For a
European option, there is only one exercise date, the option expiry
date.

For an American option (AmericanOpt =
1):

NINST-by-2 vector
of exercise date boundaries. For each instrument, the option can be
exercised on any tree date between or including the pair of dates
on that row. If only one non-NaN date is listed,
or if ExerciseDates is NINST-by-1,
the option can be exercised between the valuation date of the stock
tree and the single listed exercise date.

AmericanOpt

If AmericanOpt = 0, NaN,
or is unspecified, the option is a European option. If AmericanOpt
= 1, the option is an American option.

BarrierSpec

List of string values:

'UI': Up Knock In

'UO': Up
Knock Out

'DI': Down
Knock In

'DO': Down
Knock Out

Barrier

Vector of barrier values.

Rebate

(Optional) NINST-by-1 matrix
of rebate values. Default = 0. For
Knock-in options, the rebate is paid at expiry. For Knock-out options,
the rebate is paid when the barrier is reached.

Options

(Optional) Derivatives pricing options structure created
with derivset.

See instbarrier for a
description of barrier contract arguments.

Description

[Price, PriceTree] = barrierbyeqp(EQPTree,
OptSpec, Strike, ExerciseDates, AmericanOpt, BarrierSpec,
Barrier, Rebate, Options) computes the
price of barrier options using an equal probabilities binomial tree.

Price is a NINST-by-1 vector
of expected prices at time 0.

PriceTree is a tree structure with a vector
of instrument prices at each node.

This example shows how to price a barrier option using an EQP equity tree by loading the file deriv.mat, which provides EQPTree. The EQPTree structure contains the stock specification and time information needed to price the option.

Derman, E., I. Kani, D. Ergener and I. Bardhan, "Enhanced
Numerical Methods for Options with Barriers," Financial
Analysts Journal, (Nov. - Dec. 1995), pp. 65-74.