Posted by
Andreas Spengler-2 on
URL: http://quantlib.414.s1.nabble.com/Specifics-of-Himalayan-Option-tp5293.html
Hi,
regarding the description of the Himalayan Option,
"The payoff of a Himalaya option is computed in the following way: Given a
basket of N assets, and N time periods, at the end of each period the
option who performed the best is added to the average and then discarded
from the basket. At the end of the N, periods the option pays the max
between the strike and the average of the best performers."
I have some questions regarding that:
- What exactly does "performed the best" mean? Relative to the starting
value? Relative to the value at the end of the preceding period?
- Is the relative performance or the absolute value at the fixing dates
added to the running average?
- In conjunction with the above, would I have to specify an absolute
strike or a relative strike (e.g. 104%)?
Thanks for any help,
Andreas
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