Barrier option valuation in Python: exotic options and Monte Carlo with Johnson SU

Today we are investigating the valuation of conventional and exotic barrier options in Python using real-world stock price and option chain data and Monte Carlo simulations with the Johnson SU distribution function - a concept that has been developed with option pricing in mind. We are going to visualise the payoff structures of both knock-in and knock-out options, automate the interpretation of model results, and compare their fair values to real-world market prices.
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[@NEDLeducation]

You can find the .ipynb for this video and some additional materials here: drive.google.com/drive/folders/1sP40IW0p0w5IETCgo464uhDFfdyR6rh7
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[@avinashmishra6783]

Now this is what I was waiting for...... Thank you so much for this informative video.

[@timvandevyver6123]

Hi, thanks for the clear example. However, the reason that your calls are undervalued and puts are overvalued is mainly due to the fact the stock price is forecasted here with returns observed in the 'real world' instead of in de 'risk-free' world. If I would sell a call option for the price in your example I can do an arbitrage by dynamically hedging the option with underlying apple stock an make a guaranteed profit without any risk.

[@plazmafield]

Thanks for making the video Savva, I'll reach out to you within the week about a tutoring session

[@sitaramdoddapaneni1594]

Thanks a lot sharing such valuable information!😊

[@Trivitu]

Hi Savva, thanks for another great video!!! I have one small question, wouldn´t be better to use the adjusted closing prices? I alway thought that the adjusted prices are better indicator of the price change, is there disadvantages when using adjusted prices?
Thanks in advance.

[@ControlTheGuh]

I'm confused..why didn't you use log returns for the goodness of fit test?

[@plazmafield]

Hey Savva, would you be willing to change "Advanced" to "Barrier" in the title just so it's easier to spot when looking for it? Not a big deal if you don't want to. Or something like "Barrier Option valuation in Python: Johnson SU (4 parameters), Monte Carlo, and exotic options"
It doesn't have to be exactly like that. I'm just trying to suggest that "Advanced" is uninformative. Johnson SU and Monte Carlo are more important and should be listed before the term exotic option (which I assume is a buzz word you included to help categorize these exotic option videos together when doing a youtube search). I also suggest noting somewhere 4 parameter or whatever term would be appropriate since you will be releasing my followup video on ARCD with 8 Johnson SU parameters within a couple of weeks. The suggested title is not intended to be taken as is, alter it how you see fit.

[@NEDLeducation]

Hi Stephen, I edited the title a bit. Thanks for your suggestion. - Arina

[@plazmafield]

@@NEDLeducation thanks Anna, I appreciate it