View Full Version : Hardy EIA
10-21-2007, 11:46 PM
Going through this stuff and getting stuck on this option within an option idea for ratchets. Anyone have a good way to think about some of this stuff?
10-22-2007, 12:14 AM
In non-mathematical terms:
At the first ratchet date, the policy value will either be the AV or the GMAV. At the next ratchet date, your value will either be the AV or the GMAV, and the GMAV is now either equal to the last period AV or the last period GMAV. If one was to buy an option to hedge that second point in time, one would have to consider the option needed for that first point in time as well. And this continues to compound as you look more ratcheting periods into the future...
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