Quasi Barrier Options

Quasi barrier options are used to model how stock and option prices react to announced price floors and ceilings. There is surprisingly little literature about this, so I decided to take matters into my own hands and try to develop the options pricing formulas myself.

Progress thus far


Dealing with the put call parity violation is tricky. For a lower barrier, this can be handled by introducing ‘drift’ to make long term puts worthless, but is a lower barrier the same as risk-free drift? The put call parity for an upper barrier an be handled by introducing a hard to borrow fee.