Rainbow Rainbow A rainbow is a meteorological phenomenon that is caused by reflection, refraction and dispersion of light in water droplets resulting in a spectrum of light appearing in the sky. It takes the form of a multicoloured circular arc. Rainbows caused by sunlight always appear in the section of sky directly opposite the sun. Rainbows can be full circles. However, the observer normally sees only an arc formed by illuminated droplets above the ground, and centered on a line from the sun to the observer's eye. In a primary rainbow, the arc shows red on the outer part and violet
Rainbow option Rainbow option Rainbow option is a derivative exposed to two or more sources of uncertainty, as opposed to a simple option that is exposed to one source of uncertainty, such as the price of underlying asset. The name of rainbow comes from Rubinstein (1991), who emphasises that this option was based on a combination of various assets like a rainbow is a combination of various colors. More generally, rainbow options are multiasset options, also referred to as correlation options, or basket options. Rainbow can take various other forms but the combining idea is to have a payoff that is depending