I have a situation as follows:
- One year call option on a Euro stock with a Euro denominated strike.
- Knock in feature as follows - The option can only pay out if the growth in the Euro stock over the year exceeds the growth in a USD denominated stock over that period.
How would I go about valuing this option? My instinct is to simulate the Euro and USD stocks using correlated GBM, but I am wondering if there are any intricacies that I am missing in doing this?
