Asset Maximum Or Minimum Payout Commitment

From Open Risk Manual

Definition

Asset Maximum Or Minimum Payout Commitment. A commitment to pay out on the maximum or minimum of a set of assets. Further Notes Maximum of n Assets This rainbow is similar to the best of n assets plus cash we referred to in part a, with the exception that no cash payoff is possible and there is a strike price for this type of option. The payoff of a call and put are given as: Rainbow-Call = max[0, max(S1, S2) - X] Rainbow-Put = max[0, X - max(S1, S2)] Minimum of n Assets The counterpart to a maximum of n assets, this rainbow pays out the value of the underperformer of the n assets. The payoff for minimum of 2 asset rainbow calls and puts are given as: Rainbow-Call = max[0, mainS1, S2) - X] Rainbow-Put = max[0, X - min(S1, S2)]


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This entry annotates a FIBO Ontology Class. FIBO is a trademark and the FIBO Ontology is copyright of the EDM Council, released under the MIT Open Source License. There is no guarantee that the content of this page will remain aligned with, or correctly interprets, the concepts covered by the FIBO ontology.

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