Pricing Basket Options by Polynomial Approximations

Pablo Olivares and Alexander Alvarez

Journal of Applied Mathematics, 2016, vol. 2016, issue 1

Abstract: We propose a closed‐form approximation for the price of basket options under a multivariate Black‐Scholes model. The method is based on Taylor and Chebyshev expansions and involves mixed exponential‐power moments of a Gaussian distribution. Our numerical results show that both approaches are comparable in accuracy to a standard Monte Carlo method, with a lesser computational effort.

Date: 2016
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1155/2016/9747394

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jnljam:v:2016:y:2016:i:1:n:9747394

Access Statistics for this article

More articles in Journal of Applied Mathematics from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().