Quantitative Finance Stack Exchange is a question and answer site for finance professionals and academics. Join them; it only takes a minute:

Sign up
Here's how it works:
  1. Anybody can ask a question
  2. Anybody can answer
  3. The best answers are voted up and rise to the top

I'm trying to price an option with payoff $\max\{a\cdot S_t - K,0\}$ where $a$ is a known constant. Ideally I'm looking for a closed form, continuous-time solution. Where should I begin?

share|improve this question
This is not exotic at all. Why don't you just bring $a$ out of the max? – Alexey Kalmykov Aug 19 '12 at 8:31
because I was too tired to realize I could, I suppose. thanks, now it looks quite trivial, actually. if you post it as an answer, I'll mark it accepted! – em70 Aug 19 '12 at 13:42
up vote 8 down vote accepted

The payoff $\max\{a\cdot S_t - K,0\}$ can be re-written as $a\cdot\max\{S_t - K/a,0\}$. Therefore it can be priced as a regular call option with the strike $K/a$.

share|improve this answer

Your Answer


By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.