A simple efficient approximation to price basket stock options with volatility smile

DOI10.1007/s10436-017-0292-1zbMath1398.91620OpenAlexW2579942654MaRDI QIDQ525204

Robert J. Elliott, Ping Wu

Publication date: 28 April 2017

Published in: Annals of Finance (Search for Journal in Brave)

Full work available at URL: https://ap01.alma.exlibrisgroup.com/view/delivery/61USOUTHAUS_INST/12144429460001831

zbMATH Keywords

basket optionsGentle's methodLevy's methodlog-normal approximation

Mathematics Subject Classification ID

Processes with independent increments; Lévy processes (60G51) Applications of statistics to actuarial sciences and financial mathematics (62P05) Numerical methods (including Monte Carlo methods) (91G60) Derivative securities (option pricing, hedging, etc.) (91G20)

Cites Work

• Pricing of arithmetic basket options by conditioning.
• Arbitrage-free SVI volatility surfaces
• Pricing and hedging basket options to prespecified levels of acceptability
• Approximated moment-matching dynamics for basket-options pricing
• Valuing Asian and Portfolio Options by Conditioning on the Geometric Mean Price
• The value of an Asian option
• General closed-form basket option pricing bounds
• A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options

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