# Questions tagged [payoff]

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### Architecture of a global pricing library with immutable payoffs

By global pricing library I mean a library handling equity, rate etc, hybrid products having several models (BS, LV, SV, LSV) having several numerical methods (analytic formula, MC, PDE FD/FE) I ...
125 views

### Black-Scholes market and payoff with integrals

I am struggling with the following exercise: Prove that on Black-Scholes market, with some parameters $r, \mu, \sigma >0$, a payoff X=\int_{0}^{T}\ln \frac{S_t}{S_0}\mathrm{d}t+\frac{1}{\sigma}\...
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### Discontinuous derivative payoff approximation

Consider a derivative of digital type which pays this kind of payoff at time $T$: \begin{align*} g(S_T,k) &= \begin{cases} P_0,~S_T>k \\ S_T, ~S_T\leq k \end{cases} \end{...
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### Explaining an Option product: SIX Discount Certificates

So I have the option with the important info above. I am trying to generate a portfolio that represents the option. However I am stuck on the first hurdle as I believe it is a call option as the ...
141 views

### “For any random variable $X$, someone will be willing to buy and someone to sell a financial instrument, whose final payoff is $X$.”

we will assume that for any random variable $X:\Omega\rightarrow\mathbb{R}$, some investor will be willing to buy and some investor will be willing to sell a 'financial instrument' whose final payoff ...
212 views

### What does it mean by “A one period bond is a claim to a unit payoff.” from Cochrane?

In the textbook Asset Pricing by John Cochrane, on p. 19 (corresponding table on p. 18), he claims that A one period bond is of course a claim to a unit payoff." What does he mean by "a unit ...
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### Differentiating a Payoff

Okay this is probably going to be an extremely easy/straightforward question but I thought I should post it here just to double check. Suppose I have a payoff $\Phi = (S_{T}-K)^{+}$. Now let's say I ...
88 views

### Construct a portfolio of European call options with a certain payoff function

My question is similar to Replicate a Portfolio with Given Payoff but I am not quite sure how to apply this to my problem. A portfolio of European call options on an asset $S_T$ has a payoff function ...