medium · FRM Part 1 Financial Markets and Products
An 'up-and-in' call option with barrier B = 120 and strike K = 100 is currently active because the asset touched 122 last week.
How does this option's price behavior now compare to a vanilla European call with K = 100?
- It now behaves exactly like a vanilla European call.
- It will have a lower Delta than the vanilla call to account for the barrier event.
- It will knock out if the price falls back below 120.
- It remains cheaper than a vanilla call because of its history.
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