(see part one here)
The distinction between basket and multi-asset products is important. Baskets are popular because investors can choose any group of underlying assets and overlay an appropriate risk profile using a given structure such as principal protection, autocallable or income generation. The choice of components is important and affects the pricing parameters, but performance is a function of the basket return, which is usually a weighted average of the stock performances.
The week on Risk.net, July 7-13, 2018Receive this by email