The manifestations of rainbow options are constantly changing and expanding, and no one can accurately classify and describe them completely. Rainbow option has a simple form of expression-two-color rainbow maximum European call option. As the name implies, options have two underlying assets and can only be exercised on the maturity date. Its special feature is that its income structure depends on the best of the two basic assets.
Rainbow option is a kind of multi-asset option, just like rainbow has many colors, which is the origin of its name. Generally speaking, the profit and loss structure of rainbow options depends on one of several assets, and the number of underlying assets is also called rainbow chromatic number.
It should be noted here that the underlying assets of rainbow options can be basic assets such as stocks and commodities, or derivative assets such as vanilla options such as European call and American put, with flexible forms.
Extended data
classify
Divide by rights
According to the rights of options, there are two kinds: call options and put options.
According to the types of options, it can be divided into European options and American options.
According to the exercise time, it is divided into three types: European option, American option and Bermuda option.
characteristic
Option trading is actually the trading of such rights. The buyer has the right of execution and the right of non-execution, and can choose flexibly. Options are divided into OTC options and OTC options. OTC options trading is generally reached by both parties.
Baidu Encyclopedia-Options