# Futures and options trading meaning of colors

Rainbow options are usually priced using an appropriate industry-standard model such as Black—Scholes for each individual futures and options trading meaning of colors component, and a matrix of correlation coefficients applied to the underlying stochastic drivers for the various models. The options are often considered a correlation trade since the value of the option is sensitive to the correlation between the various basket components. Rainbow options refer to all options whose payoff depends on more than one underlying risky asset; each asset is referred to as a color of the rainbow. This economics -related article is a stub.

More generally, rainbow options are multiasset options, also referred to as correlation options, or basket options. Energy derivative Freight derivative Inflation derivative Property derivative Weather derivative. Rainbow options are used, for example, to value natural resources deposits.

The options are often considered a correlation trade since the value of the option is sensitive to the correlation between the various basket components. Retrieved from " https: Rainbow options are usually priced using an appropriate industry-standard model such as Black—Scholes for each individual basket component, and a matrix of correlation coefficients applied to the underlying stochastic drivers for the various models.

Energy derivative Freight derivative Inflation derivative Property derivative Weather derivative. The options are often considered a correlation trade since the value of the option is sensitive to the correlation between the various basket components. The name of rainbow comes from Rubinstein [2]who emphasises that this option was based on a combination of various assets like a rainbow is a combination of various colors. Rainbow options are usually priced using an appropriate industry-standard model such as Black—Scholes for each individual basket component, and a matrix of correlation coefficients applied to the underlying stochastic drivers for the various models. Rainbow options are used, for example, to futures and options trading meaning of colors natural resources deposits.

More generally, rainbow options are multiasset options, also referred to as correlation options, or basket options. Rainbow options refer to all options whose payoff depends on more than one underlying risky asset; each asset is referred to as a color of the rainbow. Rainbow options are usually priced using an appropriate industry-standard model such as Black—Scholes for each individual futures and options trading meaning of colors component, and a matrix of correlation coefficients applied to the underlying stochastic drivers for the various models. Other popular options that can be reformulated as a rainbow option are spread and exchange options.

This page was last edited on 1 Septemberat From Wikipedia, the free encyclopedia. The options are often considered a correlation trade since the value of the option is sensitive to the correlation between the various basket components. In particular, derivatives in the currency and mortgage markets have been subject to liquidity risk that was not reflected in the pricing of the option when sold.

Rainbow options refer to all options whose payoff depends on more than one underlying risky asset; each asset is referred to as a color of the rainbow. The options are often considered a correlation trade since the value of the option is sensitive to the correlation between the various basket components. Options finance Economics and finance stubs. From Wikipedia, the free encyclopedia.

Retrieved from " https: The options are often considered a correlation trade since the value of the option is sensitive to the correlation between the various basket components. Other popular options that can be reformulated as a rainbow option are spread and exchange options.

University of California at Berkeley, By using this site, you agree to the Terms of Use and Privacy Policy. Rainbow can take various other forms but the combining idea is to have a payoff that is depending on the assets sorted by their performance at maturity. Examples of these include: This economics -related article is a stub.

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