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- 9/29/11
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Consider a derivative whose payoff depends on two different times T1 and T2, with T2 > T1 > 0 and two numbers K1 > 0 and K2 > 0. The buyer of this derivative has the right to buy 1 share of the stock
at time T1 at price K1. If the price of the stock at time T1 is lower than or equal to K1,
he then has a right to buy the stock at price K2 at time T2. (He does not have the buying
opportunity at time T2 if the price of the stock at time T1 is strictly larger than K1.) Find
a formula for the current price (i.e. at time t = 0) of this derivative.
Is this exotic option have a specific name ?
How to price it ?
Thank You
Vasin
at time T1 at price K1. If the price of the stock at time T1 is lower than or equal to K1,
he then has a right to buy the stock at price K2 at time T2. (He does not have the buying
opportunity at time T2 if the price of the stock at time T1 is strictly larger than K1.) Find
a formula for the current price (i.e. at time t = 0) of this derivative.
Is this exotic option have a specific name ?
How to price it ?
Thank You
Vasin