## RSO

Subtype of Payoff TypeThe name

**derives from**

*RSO***isk**

*R***caling**

*S***ptions.**

*O*The payoff is given by

**, where**

*max{ ε[βx-λ(K¹⁻ᵅ)(xᵅ))] , 0 }***are all constants.**

*β, λ, K, α*It is further assumed that

**,**

*β >= 0***and**

*0 <= α <= 1*

*λ >= 0*Furthermore

**can take only the values**

*ε***or**

*1***and corresponds to a payoff attribute called Direction**

*-1*Defining the

**as the quantity**

*exercise price***, the parameter**

*(K¹⁻ᵅ)(xᵅ)***is an index of exercise price uncertainty.**

*α*As

**tends to**

*α***the exercise price approaches the constant**

*0*

*K*European options having this payoff can be priced using Pricing Method = BlenmanClark