Search results
Results from the WOW.Com Content Network
A straight call or put option, either American or European, would be considered a non-exotic or vanilla option. There are two general types of exotic options: path-independent and path-dependent. An option is path-independent if its value depends only on the final price of the underlying instrument.
The rationale behind the above formulation of the Vanna-Volga price is that one can extract the smile cost of an exotic option by measuring the smile cost of a portfolio designed to hedge its Vanna and Volga risks. The reason why one chooses the strategies BF and RR to do this is because they are liquid FX instruments and they carry mainly ...
An Asian option (or average option) is an option where the payoff is not determined by the underlying price at maturity but by the average underlying price over some pre-set period of time. For example, an Asian call option might pay MAX(DAILY_AVERAGE_OVER_LAST_THREE_MONTHS(S) − K, 0).
Up-and-in: spot price starts below the barrier level and has to move up for the option to become activated. Down-and-in: spot price starts above the barrier level and has to move down for the option to become activated. For example, a European call option may be written on an underlying with spot price of $100 and a knockout barrier of $120.
For example, an option may be quoted at $0.75 on the exchange. So to purchase one contract it costs (100 shares * 1 contract * $0.75), or $75. ... For every price below the strike price of $20 ...
A basket option is similar to an index option, where a number of stocks have been grouped together in an index and the option is based on the price of the index, [1] [2] but differs in that the members and weightings of an index can change over time while those in a basket option do not. [3]
Example: Stock X is trading for $20 per share, and a call with a strike price of $20 and expiration in four months is trading at $1. The contract costs $100, or one contract * $1 * 100 shares ...
A cliquet option or ratchet option is an exotic option consisting of a series of consecutive forward start options. [1] The first is active immediately. The second becomes active when the first expires, etc. Each option is struck at-the-money when it becomes active. [2]