Journal of Computational Finance

How to solve multiasset Black-Scholes with time-dependent volatility and correlation

L. P. Bos and A. F. Ware


It is shown that, just as in the single-asset case, one may solve the multiasset Black-Scholes equation by replacing time-varying volatilities and other parameters by their constant averages. This associated constant parameter problem may then be solved either by the usual integral formulas or by means of a recombining binary tree, neither of which would have been possible without using the transformation. The result extends what is already well known for single-asset single-factor models to the multidimensional case, for which the usual one-dimensional proof does not apply.

To continue reading...

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an indvidual account here: