3

Is there a name for an option whose value is determined by a time difference?

I mean a derivative whose contract reads something like, "If stock $X$ goes below $Y$ at time $T_1$, and $T_1$ is before $T_0$, pay out $c\times(T_0-T_1)$".

The exposure is similar to that of an annuity, but different enough that I wondered whether it had a name of its own.

Volume Man
  • 31
  • 1
  • Is $T_1$ a stochastic time before $T_0$, or does the payoff depend on the stock going below $Y$ at any date up until $T_1$, with $T_1$ a fixed date? – Kermittfrog Sep 20 '21 at 09:27
  • @Kermittfrog I should have been clearer about the parameters. The contract specifies $X$, $Y$, $T_0$ and $c$. If such a $T_1$ occurs, then there's a payout. This is the latter formulation you suggest. – Volume Man Sep 20 '21 at 15:55
  • Did you see such an option? Never heard of it, but would like to know what problem this would solve (what purpose the product has). – AKdemy Sep 22 '21 at 19:39

0 Answers0