Who Broke the Barrier?
Mar 08, 2005
Barrier options are perhaps the oldest type of exotic options that have been in existence. It came as a complete surprise to us to learn that barrier options were traded in the United States, albeit quite sporadically, since 1967, six years before the Chicago Board of Options Exchange (CBOE) was formed in 1973.
Apparently, "down-and-out" types of call and put options were more prevalent than other types of barriers, such as "up and out", "up and in" or "down and in". Synder (1969) described "down and out" options as "limited risk special options". DLJ, an investment bank, started to use "down and out" options in early seventies (Fortune, November 1971, page 213).
The real turning point in the barrier options market was probably 1992 and it is estimated by some that since then the market has doubled every year (RISK, April 1997, page 29).
(Taken from Exotic Options, Second Edition by Peter G. Zhang).
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