File Name: Exotic Options – Spread on Futures
Location: Modeling Toolkit | Exotic Options | Spread on Futures
Brief Description: Computes the value of an option where the underlying assets are two different futures contracts, and their spreads (the difference between the futures) are used as a benchmark to determine the value of the option
Requirements: Modeling Toolkit
Modeling Toolkit Functions Used: MTFuturesSpreadCall, MTFuturesSpreadPut
A Spread on Futures Options is an option where the payoff is the difference between the two futures values at expiration (Figure 71.1). That is, the spread is Futures 1 – Futures 2, while the call payoff is the value Spread – Strike, and the put payoff is Strike – Spread.
Figure 71.1: Spread on futures options
