March 24th, 2009, 6:11 am
I've seen something a bit similar: the timer options. The instrument is like a vanilla option, except that at inception the expiry date is unknown. Instead, one choses a volatility target and a horizon, which will be used to determine when the option will expire. This allows to trade options with supposedly to high vols.In your instrument, do you have any idea the strike would be determined wrt the realised vol?