If the parameters of an exchange rate option change with the time, the user can input
the contract through the exchange rate step option dialog window.
An exchange rate step option is a contract on the exchange rate of
currency 1 per currency 2. The payment formula is
subject to minimum and maximum constraints, paid Freq.
times per year.
If the payment currency is not the same as currency 1, the deal becomes a quanto
deal, and the user needs to input the volatility of the exchange rate of currency 1 per
payment currency, and the correlation.
The following is the input window for an exchange rate step option. Notice that the
spreadsheet section at the bottom of the window allows for very general option structures.
