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- Volatility Derivatives 1
- The world of Structured Products 4
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- Altiplano Option /
- Contract Description
Contract Description
Altiplano options have two components:
- a vanilla-type payoff if a barrier event occurs
- a coupon payoff if it does not
Given a basket of n stocks, the payoff is: 
where IB is 1 if barrier event occurs and 0 if it does not, in which case the option would pay a coupon C.
Here we have used a call option, but we could use any option.
The barrier activation can usually be made by the individual assets themselves. This makes the Altiplano sensitive to individual asset moves, rather than the collective sum.
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