Basket options
Optimal damping with a hierarchical adaptive quadrature for efficient Fourier pricing of multi-asset options in Lévy models
The authors put forward a a method for pricing European multi-asset options intended to address challenges related to the choice of damping parameters and the treatment of high dimensionality when designing methods for Fourier pricing options.
Black basket analytics for mid-curves and spread options
A new solution to calibrate derivatives with multiple strikes is proposed
Deconstructing correlation
Peter Austing introduces an analytic or semi-analytic valuation of basket options
Cross-dependent volatility
Julien Guyon introduces cross-dependent volatility models and calibrate them to market smiles
Correlation skew via stochastic correlation and jumps
Valer Zetocha introduces a correlation model based on the Jacobi process with jumps
Quant Congress USA: BMW options "a recipe for disaster", says Dupire
Naive treatment of interaction between skew and correlation means writers of best-middle-worst options will face huge hedging losses, says top quant
Marking systemic portfolio risk with the Merton model
Marking systemic portfolio risk with the Merton model
Correlations in asynchronous markets
Correlations in asynchronous markets
Breaking correlation breaks
Breaking correlation breaks
Playing on forex correlation
The eurozone crisis sent market participants scrambling to put on macro hedges. A popular trade was to short the euro, but with the cost of this strategy escalating, some turned to correlation products. By Christopher Whittall
Gambling on dividends
Dividends have caused sizeable losses for dealers and investors over the past few months, as a precipitous fall in expectations has hit structured product issuers and those who participated in dividend swaps. Mark Pengelly investigates
What’s a basket worth?
Peter Laurence and Tai-Ho Wang take a significant step in the valuation of basket options with positive and fixed weights. These model all index options, price, cap or equal weighted. Departing from the usual Black-Scholes framework, the authors provide…
What’s a basket worth?
Peter Laurence and Tai-Ho Wang take a significant step in the valuation of basket options with positive and fixed weights. These model all index options, price, cap or equal weighted. Departing from the usual Black-Scholes framework, the authors provide…
Index volatility surface via moment-matching techniques
Peter Lee, Limin Wang and Abdelkerim Karim present a basket construction technique using Gram-Charlier-Edgeworth expansions. They show how to express basket option skews and smiles in terms of its underlying components, and demonstrate how market…
Asian basket spreads and other exotic averaging options
Giuseppe Castellacci and Michael Siclari of OpenLink introduce a class of exotic options that simultaneously generalises both Asian and basket options. They develop approximate analytic models for real-time pricing of complex instruments that average…