PAT - The Payoff Advantage Tool
Gap Call Option

Domestic Payoff: Gap Call Option.

Formula: Hd = (Sd -Xd1) * heavy (Sd - Xd2)

Xd1 = 0.5; Xd2 = 1

Foreign Payoff: Gap Put Option.

There are more cases than just basic vanilla European Put-Call parity where domestic and foreign financially equivalent payoffs look symmetrical in shape. But without a tool that identifies financially equivalent foreign counterparts, it is hard to predict when the domestic and foreign payoffs have similar shapes and when they do not.

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