A breed of options which commonly have dispersion-related payoffs. Particularly, the actual payoff of such options depends at maturity on the performance of an underlying asset basket. Dispersion arises from the dispersed weights assigned to the underlying assets, and therefore affects both volatility and correlation values. For example, a dispersed option would have its underlying weights set at 80%, 15% and 5%. On the contrary, an option with 50%, 30% and 20% weights is less dispersed and consequently has a lower price than that of the more dispersed option.
The main dispersion options include rainbow options, outperformance options, individually capped basket calls, etc.
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