Option on final rate vs average rate

difflab2000 · April 15th, 2009, 7:58 am

I need to protect myself against a sudden jump in EURUSD a year from now. I use the following notations:K = Strike s12 = Spot rate 12 months from now (settlement date)avg12 = Average spot rate between today and 12 months from now1. I want my payout to be (s12-avg12)I can achieve this by:Buying EURSEK on average rate forward and sell EURSEK in a forward to receive[s12-K] [avg12-K] = s12-avg122. I want my payout to be Max[s12-avg12,0]How can I achieve this using vanilla options and average rate options (or any other way)? I cant get it straightIs it possible?

zwader · April 16th, 2009, 11:00 am

This seems to be just a normal OTC floating strike asian option. OTC so the are rather difficult to get.