An exotic option that has the ratio of two assets as underlying. The payoff of the option is based on the simple correlation between the performances of two assets. This payoff is calculated using the following formula:

payoff = Max (ω S₂/S₁ – ω K, 0)

where ω= -1 (this helps determine the type of option: if a call, ω= 1, if a put, ω= -1)

For example, if S₂= 200, S₁= 100, and the option is a call with a quotient strike of 1.5 then:

Payoff = Max (1 x 200/100 – (1) x 1.5, 0), or payoff= Max (2 -1.5, 0)

In this case, the quotient payoff is 0.5 and the monetary payoff is 0.5 x S₁= 50.