1 Answers
The Timer Call is an Exotic option, that allows buyers to specify the level of volatility used to price the instrument.
As with many leading ideas, the principle of the timer call is remarkably simple: instead of a dealer needing to use an implied volatility to use in pricing the option, the volatility is fixed, and the maturity is left floating. As a result of this, the Timer Call allows the pricing of call and put options on underlyings for which ordinary options are not priced; dealers in a normal option are exposed to the difference between the volatility they estimate and the realised volatility, whereas in a Timer Call, this risk is much diminished.
4 views
Answered