I am currently stuck with the following problem:
You need to price the following exotic option, where the share price of Stock ABC is the underlying:
• Time to maturity: 2 years
• Right to exercise: Only at maturity
• Payoffs: You receive or pay the minimum of (𝑆𝑇 − 𝑏) and (𝑎 − 𝑆𝑇), where 𝑆𝑇 is the stock price at maturity 𝑇. 𝑎 and 𝑏 are positive constants, set to 𝑎 = 𝐸𝑈𝑅 80 and 𝑏 = 𝐸𝑈𝑅 35 in our contract.
Derive a pricing formula for the exotic option described above (using BS)
I am not sure what type of exotic option I am encountering, may someone of you can give me a clue?