Pricing formulas for Barrier options under Black-Scholes

[cyrilchim]

Formulas for pricing a Barrier option under Black-Scholes model is of interest. (See, e.g., Section 26.9 of Hull(2018), Options, Futures, and Other Derivatives, 9th edition).

The module implementing this method should live under tf_quant_finance/volatility/barrier_option.py. It should support both puts (up-and-in put, down-and-out put) and calls (down-in call, up-and-out call). Tests should be in barrier_option_test.py in the same folder.

[Patil2099]

@cyrilchim Can I work on this?

[cyrilchim]

Hi Pankaj! Thanks for reaching out!

Yes, I'm assigning the issue to you. Please follow Google Python and TensorFlow Probability style guides. Will update with the internal one once it is published.

As a guidance, please familiarize yourself with option_price and binary_price implementations so that it is easier for you to get started.

Please reach out if you have any issues.

[cyrilchim]

@Patil2099 Could you please let us know if there is any progress on this?

[saxena-ashish-g]

@DevarakondaV

You might find this paper useful (around page 20).

[DevarakondaV]

@saxena-ashish-g I think I can implement this. I'll give it a shot since @Patil2099 hasn't responded.

[cyrilchim]

Reassigned to @DevarakondaV . Thanks!

[DevarakondaV]

Is it expected that the model executes in both graph and eager mode?

[cyrilchim]

Yes, we expect that the user is able to build a graph

[cyrilchim]

Thanks, Vishnu! This is now merged.

[DevarakondaV]

Hey @cyrilchim no problem! Just to let you know that I haven't committed the changes for xla compatibility yet. Additionally, I was still looking at this. Not sure if you still want me to continue with it?

[saxena-ashish-g]

Vishnu,

That (my comment about the dividends) is relatively minor so don't worry about it if you haven't already put in time. We will fix it at a later point. If you already have a fix, then please feel free to send another pr and we will merge it.

Cheers, Ashish

On Sun, 7 Jun 2020, 17:59 Vishnu Devarakonda, notifications@github.com wrote:

Hey @cyrilchim https://github.com/cyrilchim no problem! Just to let you know that I haven't committed the changes for xla compatibility yet. Additionally, I was still looking at this https://github.com/google/tf-quant-finance/pull/31#discussion_r435117425. Not sure if you still want me to continue with it?

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[DevarakondaV]

@cyrilchim and @saxena-ashish-g, I'll put in the pull request as soon as I can!

[cyrilchim]

To add to what Ashish says, if you have an XLA test, please feel free to send a change as that would be useful.