Given a basket Call/Put:

$BasketCall_{payoff} = max[0, \Sigma^n_{i=1} w_iS_i(T) - K]$

If the spot price of the basket goes up/down, how would the implied correlation change?

I guess what I am not clear on the relationship between the implied correlation and the spot price, the price of the option and the implied volatility.


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.