Abstract
In this paper, we introduce a new type of barrier options, that is, Lizard Option. The most brand-new point is that its payoff explicitly includes stock prices in the first passage time to a given barrier level and right before this time. Then, basing on the risk-neutral valuation, we analytically price Lizard Option under the Variance Gamma model. At the same time, we also obtain an analytical valuation of one touch barrier option.
