Exotic Options – Spread on Futures

File Name: Exotic Options – Spread on Futures

Location: Modeling Toolkit | Exotic Options | Spread on Futures

Brief Description: Computes the value of an option where the underlying assets are two different futures contracts, and their spreads (the difference between the futures) are used as a benchmark to determine the value of the option

Requirements: Modeling Toolkit

Modeling Toolkit Functions Used: MTFuturesSpreadCall, MTFuturesSpreadPut

A Spread on Futures Options is an option where the payoff is the difference between the two futures values at expiration (Figure 71.1). That is, the spread is Futures 1 – Futures 2, while the call payoff is the value Spread – Strike, and the put payoff is Strike – Spread.


Figure 71.1: Spread on futures options

error: Content is protected !!