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Pricing Rainbow Options

Imagine’s clients are making increasing use of our Monte Carlo Generator to price multi-asset best-of/worst-of options (aka Rainbow Options).  The pricing solution presented in this blog leverages the flexibility of the Imagine Financial Platform (IFP).  More specifically, the IFP Model Interface and the IFP Monte Carlo Simulation Generator, as described below.

  • The IFP Model Interface enables users to register their own pricing models using an app written with our JavaScript API. The interface provides access to security-level information and pricing environment inputs and, when directed, passes outputs back to Fair and Greeks columns in the Imagine Trading System (ITS). Users have full control over the model calculations performed within the app. Note that any custom model registered via this interface behaves like one of Imagine’s native models.
  • The IFP Monte Carlo Simulation Generator is a JavaScript API method that gives users access to a simulation generator they can use for Monte Carlo pricing. Users have the ability to define random factors, set the pricing inputs for each factor, set the number of simulations and periods, determine the volatility lookup type, and much more.

Read full article here.

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