Mountain range (options)
Encyclopedia
Mountain ranges are exotic option
s originally marketed by Société Générale
in 1998. The options combine the characteristics of basket option
s and range options by basing the value of the option on several underlying assets, and by setting a time frame for the option.
The mountain range options are further subdivided into further types, depending on the specific terms of the options. Examples include:
Given n stocks,
in a basket, the payoff for an Everest option is: 
was a Titan who supported the Earth on his back. The Atlas option is a call on the mean (or average) of a basket of stocks, with some of the best and worst performers removed. (Quessette 2002). Given n stocks
in a basket, define:
where
is the i-th smallest return, so that:
The Atlas removes a fixed number (
) of stocks from the minimum ordering of the basket and a fixed number (
) of stocks from the maximum ordering of the basket. In a basket of n stocks, notice that (
), to leave at least one stock in the basket on which to compute the option payoff. With a strike price 
, the payoff for the Atlas option is:
Exotic option
In finance, an exotic option is a derivative which has features making it more complex than commonly traded products . These products are usually traded over-the-counter , or are embedded in structured notes....
s originally marketed by Société Générale
Société Générale
Société Générale S.A. is a large European Bank and a major Financial Services company that has a substantial global presence. Its registered office is on Boulevard Haussmann in the 9th arrondissement of Paris, while its head office is in the Tours Société Générale in the business district of La...
in 1998. The options combine the characteristics of basket option
Basket option
A basket option is a financial derivative, more specifically an exotic option, whose underlying is a sum or average of different assets. Examples are index options, options on a portfolio, etc....
s and range options by basing the value of the option on several underlying assets, and by setting a time frame for the option.
The mountain range options are further subdivided into further types, depending on the specific terms of the options. Examples include:
- Altiplano - in which a vanilla option is combined with a compensatory coupon payment if the underlying security never reaches its strike price during a given period.
- Annapurna - in which the option holder is rewarded if all securities in the basket never fall below a certain price during the relevant time period
- Atlas - in which the best and worst-performing securities are removed from the basket prior to execution of the option
- Everest - a long-term option in which the option holder gets a payoff based on the worst-performing securities in the basket
- Himalayan - based on the performance of the best asset in the portfolio
Everest Options
Although Mount Everest is the highest point on earth, the Everest option payoff is on the worst performer in a basket of 10-25 stocks, with 10-15 year maturity. (Quessette 2002).Given n stocks,
in a basket, the payoff for an Everest option is: Atlas Options
AtlasAtlas (mythology)
In Greek mythology, Atlas was the primordial Titan who supported the heavens. Although associated with various places, he became commonly identified with the Atlas Mountains in north-west Africa...
was a Titan who supported the Earth on his back. The Atlas option is a call on the mean (or average) of a basket of stocks, with some of the best and worst performers removed. (Quessette 2002). Given n stocks
in a basket, define:where
is the i-th smallest return, so that:The Atlas removes a fixed number (
) of stocks from the minimum ordering of the basket and a fixed number () of stocks from the maximum ordering of the basket. In a basket of n stocks, notice that (), to leave at least one stock in the basket on which to compute the option payoff. With a strike price , the payoff for the Atlas option is: