MG Soft

Exotic Options

In 2008 we implemented a wide array of exotic options in PLaNETa.

  • Binary options (also called digital or cash-or-nothing options).
  • Path-dependent options.
    • Asian Options — with arithmetic or geometric averaging, with fixed or floating strike.
    • Barrier Options — knock-in and knock-out.
    • Lookback Options — with fixed or floating strike.
    • All path-dependent options in PLaNETa can have an arbitrary set of monitoring dates: for example, one can book (and price) an Asian option whose average price is calculated using the asset price between February, 23, March, 8 and July, 2. Such options are priced using MG Soft Monte Carlo pricing engine.
  • We developed a universal Monte Carlo engine for pricing exotic options.
    • Pricing is performed using Monte Carlo simulation. The number of iterations can be tuned to obtain a desired accuracy / speed ratio.
    • The pricing engine is versatile: it can be used to price any path-dependent option with an arbitrary payoff function. For instance, it can easily price an exotic option who has features of lookback, Asian and barrier options at the same time.
    • Simulation is performed in a separate thread.

We are planning to implement the following features in the future.

  • Implement the support of new types of exotic options (for example, rainbow options).
  • Implement other numerical pricing methods (binomial model, finite differences method, etc.).
© MG Soft, 2024