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5
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92 views

Basket option density in BS model

Let X and Y be two GBM’s, they have each a univariate log-normal distribution for some time t, that is $X_t\sim{LnN(µ_x, σ^2_x)}$, $Y_t\sim{LnN(µ_y, σ^2_y})$ and $Z_t=[X_t,Y_t]\sim{ MvLnN(μ, Σ)}$ ...
4
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168 views

Taking into account the correlation in Barrier options on a Basket

In a Barrier option (where the contract cancels when the underlying hits the barrier) I succesfully found the way to compute the probability of a single underlying touching the barrier (with constant ...
1
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0answers
79 views

What are the industry standard models for monte carlo simulation of basket options?

I would like to simulate an equity index, a risk free cash account and the yield curve for the purposes of valuing a guarantee on an insurance product that is being backed by both equities and cash. ...