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Valuation of Shrinking Basket Option Based on the Worst Return.
- Author(s):
- David Lee (see profile)
- Date:
- 2023
- Group(s):
- Business Management
- Subject(s):
- Derivative securities, Stock exchanges, Options (Finance)
- Item Type:
- Presentation
- Tag(s):
- option, basket option, derivative valuation
- Permanent URL:
- https://doi.org/10.17613/6gc4-gb23
- Abstract:
- A model is used to price a derivative whose payoff depends on returns over N periods on a shrinking basket of originally N assets. Each period, the worst return is added to the cumulative sum after being capped and floored, and the corresponding asset removed from the basket (hence a shrinking basket). The cap and floor rates are given for each period and the total cumulative sum is also constrained by a global cap and floor. The payment thus represents a path dependent option.
- Notes:
- https://www.calameo.com/accounts/5582503
- Metadata:
- xml
- Status:
- Published
- Last Updated:
- 4 weeks ago
- License:
- Attribution
- Share this:
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shinkbasket.pdf