Abstract
In the world of exotic options payoffs are significantly more complicated than those of plain vanilla options. Selected examples are indicated below. Some more examples will be discussed in the next sections.
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Notes
- 1.
Options with (electric) power as underlyings are also called power options
- 2.
This concept is useful in the valuation of companies using option pricing theory.
- 3.
The following well-known properties of the normal distribution are useful for the valuation: N(∞) = 1, N(−∞) = 0, 1 −N(x) = N(−x).
- 4.
In addition there may of course be changes in the input parameters.
References
M. Abramowitz, I. Stegun, Handbook of Mathematical Functions (Dover Publications, New York, 1972)
C. Alexander (ed.), The Handbook of Risk Management and Analysis (Wiley, Chichester, 1996)
L.B.G. Andersen, R. Brotherton-Ratcliffe, The equity option volatility smile: an implicit finite-difference approach. J. Comput. Finance 1(2), 5–37 (1998)
L.B.G. Andersen, V.V. Piterbarg, Interest Rate Modeling (Atlantic Financial Press, New York, London, 2010)
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Deutsch, HP., Beinker, M.W. (2019). Exotic Options. In: Derivatives and Internal Models. Finance and Capital Markets Series. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-22899-6_19
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DOI: https://doi.org/10.1007/978-3-030-22899-6_19
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