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How do I create a self financing portfolio consisting of bonds and stocks, for a portfolio of options?

My thoughts are that we would need multiple stocks to do so, since the payoff need not be binary, or we can take individual options, create each one's portfolio and then sum it up to get one final self financing portfolio.

Each option is written on one underlying stock.

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    $\begingroup$ Can you be a bit more specific: are you speaking about 1) a portfolio of options, each one written on a different stock, 2) a portfolio of options, each one written on various stocks? $\endgroup$
    – Daneel Olivaw
    Commented Jun 6, 2018 at 14:23
  • $\begingroup$ @DaneelOlivaw Sorry, edited my question. $\endgroup$
    – novice
    Commented Jun 6, 2018 at 14:33
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    $\begingroup$ Yes. The simpler approach is to take each call/put option create the replicating portfolio for that individual security and then add them up. $\endgroup$
    – phdstudent
    Commented Jun 6, 2018 at 14:40
  • $\begingroup$ @phdstudent : Thanks. if you post ill accept it as answer. $\endgroup$
    – novice
    Commented Jun 6, 2018 at 14:42

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Yes. The simpler approach is to take each call/put option create the replicating portfolio for that individual security and then add them up. Otherwise you get into issues of correlations and covariances if you want to replicate the basked in one go.

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