In Russia, options on futures on the RTS index are priced in points instead of currency, with points being directly related to the value of the US dollar such that, for example, if the dollar rises, the index drops by that amount.

My question: would I need to factor this into the model when pricing options on futures on this index, and if so, how?


  • $\begingroup$ Why "if the dollar rises, the index drops by that amount"? Each point of RTS is valued as 2 USD. Do you mean value in RUB? $\endgroup$ – Alexey Kalmykov Nov 24 '12 at 19:38
  • 2
    $\begingroup$ If I recall correctly, the key problem is that while the index is priced effectively in dollars, the margin is in RUB? In that case, you can think of this as an ADR option with premium/payout in domestic currency and the asset itself in the foreign currency. The fact that the exchange does not pay interest on the margin in an environment where rates are pretty high adds another interesting aspect to the option pricing. $\endgroup$ – Strange Nov 26 '12 at 1:48

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