Multitouch Options

Round 1

Reviewer 1 Report

Comments for author File: Comments.pdf

Author Response

See attached file, please.

Author Response File: Author Response.pdf

Reviewer 2 Report

    In this paper the author analyzed and evaluated in closed form multitouch options that are kind of barrier options that sets a gradual knockout / knock-in mechanism based on the number of times the underlying asset has crossed a predefined barrier in various time intervals before expiry. Multitouch options can be viewed as an extension of step barrier options, preserving the ability of the latter to adjust the exposure to risk over time, while eliminating the notorious danger of "sudden death" that holders of step barrier options are faced with. This makes the multitouch barrier option a more flexible instrument that can better adapt to the investors' expectations or needs.

    The paper discussed an interesting topic in risk management or investment more flexible financial instruments. Moreover, it is shown that a no-arbitrage exact value of a multitouch barrier option can be analytically computed, at least for a moderate number of barrier crossings. A few extensions to more general payoffs and shapes of the barrier were also discussed.

    Notice also that a number of numerical results have been carried out to compare multitouch barrier option prices with standard barrier option and step barrier option prices.

    Some comments:

 

1. I think in the equation (1) the index in missing the payoff (S(T)-K)⁺ otherwise this will be just a multiplication by a constant of a standard call option. Specification of η as a function of the whole path of the underlying is desired. 

2. Moreover, the barrier mentioned in line 3 page 5 is not defined and does not appear in the equation (1). 

3. The statements in lines 6 and 7 in page 5 do not explain clearly who one can get  knock-out step barrier option from the equation (1). 

4. It is true that the paper is more technical but provide interesting comparison results. 

Author Response

See attached file, please.

Author Response File: Author Response.pdf

Reviewer 3 Report

Comments on the paper titled

" MULTITOUCH OPTIONS"

This paper discusses the n - touch option (or the “baseball” option when n = 3) and is valued in closed form. The higher the number of predefined time intervals during which the barrier has been touched, the lower the value of a knock-out contract at expiry, and conversely for a knock-in one. In general, this paper presented a comprehensive analysis and can be accepted for publication after the following minor revisions:

1.        Define all the symbols used in the manuscript when they are appeared at the first time. 

2.      The manuscript did not contain conclusions!!!

3.      The originality of the paper needs to be stated clearly. It is important to have sufficient results to justify the novelty of a high-quality journal paper. The Introduction should make a compelling case for why the study is helpful along with a clear statement of its novelty or originality by providing relevant information and providing answers to basic questions such as: What is already known in the open literature? What is missing (i.e., research gaps)? What needs to be done, why and how? Clear statements of the novelty of the work should also appear briefly in the abstract section.

4.     The manuscript contains 143 equations, so if possible, create an appendix and include some of them.

5.      The list of references is old and poor. If possible, include some recent studies in this research area.

 

The manuscript did not contain conclusions

Author Response

See attached file, please.

Author Response File: Author Response.pdf