Barrier Options: Price Sensitivities

Barrier Options: Price Sensitivities

Intuition Publishing Pty Ltd
Updated Sep 24, 2020

Options traders have to pay close attention to the second order sensitivities of barrier options as the standard greeks can be quite different than for vanilla options. Here we discuss two of these secondary sensitivities, vanna and vomma. We then explore the difficulties associated with hedging barrier options, and look at a form of static replication as one solution to these hedging problems.