Financial Risk Manager Part 1

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Answer: False

**Correct answer: B (False).** A rainbow option is not essentially an exchange option. An **exchange option** is based on a difference between two assets, typically of the form: \[ \max(S_1 - S_2, 0) \] A rainbow option instead uses a **maximum or minimum** function across several assets.

Author: Manit Arora

Quick Answer

Answer-first summary for fast verification

Answer: False

**Correct answer: B (False).** A rainbow option is not essentially an exchange option. An **exchange option** is based on a difference between two assets, typically of the form: \[ \max(S_1 - S_2, 0) \] A rainbow option instead uses a **maximum or minimum** function across several assets.

Author: Manit Arora

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Q-21.3(b). True or false: a rainbow option is a type of exchange option

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MManit

Last updated: April 18, 2026 at 11:32

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A

True

B

False

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