Deriscope ## The Excel Derivatives Periscope

##### Products

Payoff__Payoff_Type__RSO

The name *RSO* derives from *R*isk*S*caling*O*ptions.

The payoff is given by *max{ ε(βx-λK^(1-α)x^α) , 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 Payoff::Direction

Defining the *exercise price* as the quantity *K^(1-α)x^α*, 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