Cliquet
A cliquet option or ratchet option is an exotic option consisting of a series of consecutive forward start options. The first is active immediately. The second becomes active when the first expires, etc. Each option is struck at-the-money when it becomes active. A cliquet is, therefore, a series of at-the-money options but where the total premium is determined in advance. A cliquet can be thought of as a series of "pre-purchased" at-the-money options. The payout on each option can either be paid at the final maturity, or at the end of each reset period.http://docs.fincad.com/support/developerFunc/mathref/cliquet.htm FiNCAD - Cliquet options] Example A three-year cliquet with reset dates each year would have three payoffs. * The first would pay off at the end of the first year and has the same payoff as a normal ATM option. * The second year's payoff has the same payoff as a one-year option, but with the strike price In finance, the strike price (or exercise price) of an ...
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