Serving the Quantitative Finance Community
WTI Options in Foreign Currency
I would like to ask the community what the best option model is for valuing WTI APO options settled in a foreign currency. The option strike is in AUZ/bbl and settle against the average of the daily WTI settle for the month in U$/bbl, and the average of the daily AUZ settle for the same month in AUZ/US. For example, the call would settle as 1) max(Strike AUZ/bbl - avg (WTI x AUZ), or 2) max(strike AUZ/bbl - (average WTI x average AUZ)) depending on what averaging method was agreed at trade origination. Thanks in advance.
