Better Or Worse Of Assets Payout Commitment
Better Or Worse Of Assets Payout Commitment. A commitment to pay out on the best or worst of a number of assets.
Better of n Assets This type of rainbow is similar to the best of n assets plus cash but with the exception that there is no possible cash payoff, and X is set to 0. With this in mind, a better of 2 assets rainbow is essentially a two-asset call option, with a payoff being: Rainbow = max[0, max(S1, S2)] Worse of n Assets Essentially the opposite to the better of n assets, with the payoff being on the asset with the lower value. We can give the payoff for this option on 2 assets as: Rainbow = max[0, min(S1, S2)]
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