The Excel Derivatives Periscope



The name RSO derives from RiskScalingOptions.
The payoff is given by max{ ε(βx-λK¹⁻ᵅxᵅ) , 0 }, where β, λ, K, α are all constants.
It is further assumed that β >= 0, 0 <= α <= 1 and λ >= 0
Furthermore ε can take only the values 1 or -1 and corresponds to a payoff attribute called

Defining the exercise price as the quantity K¹⁻ᵅxᵅ, the parameter α is an index of exercise price uncertainty.
As α tends to 0 the exercise price approaches the constant K

European options having this payoff can be priced using Model[Vanilla Option]::Pricing Method =
Model[Vanilla Option]::Pricing Method::BlenmanClark