
Explanation:
Standard rainbow option payoffs are based on either the maximum or minimum of the underlying asset set.
Thus, the exception is D.
Ultimate access to all questions.
Question 21.2. Assume S = S&P Index, Q = Nikkei index, C = cash return and K = the strike price. Each of the following gives the payoff for a RAINBOW option EXCEPT FOR:
A
a) Call on MAX[0, MAX(S, Q, C) - K]
B
b) Call on MAX[S, Q, C, K] – K
C
c) Put on MAX[0, K - MIN(S, Q, C)]
D
d) Put on K - MAX(S, Q, C, K)
No comments yet.