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YouTube T3-43 - Exotic options: chooser option

Nicole Seaman

Director of FRM Operations
Staff member
The chooser (aka, as you like it) option has one strike price (K = $40.00 in my example) but two key dates (T1 and T2). On the first date (T1), the holder "chooses" it to be either a call or a put. At that point, it becomes a standard call/put with a remaining life of Δt = T2 - T1. In the second half of the video, I show that its value is equal to a PACKAGE consisting of a call (with maturity = T2) plus exp(-qΔt) units of a put option with an adjusted strike price, = K*exp[-(r-q)Δt], and maturity of T1.

David's XLS: https://trtl.bz/2AvXXfe

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