Multiasset Derivatives and Joint Distributions of Asset Prices

Ilya Molchanov () and Michael Schmutz ()
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Ilya Molchanov: University of Bern, Department of Mathematical Statistics and Actuarial Science
Michael Schmutz: University of Bern, Department of Mathematical Statistics and Actuarial Science

A chapter in Inspired by Finance, 2014, pp 439-459 from Springer

Abstract: Abstract Several of multiasset derivatives like basket options or options on the weighted maximum of assets exhibit the property that their prices determine uniquely the underlying asset distribution. Related to that the question how to retrieve this distributions from the corresponding derivatives quotes will be discussed. On the contrary, the prices of exchange options do not uniquely determine the underlying distributions of asset prices and the extent of this non-uniqueness can be characterised. The discussion is related to a geometric interpretation of multiasset derivatives as support functions of convex sets. Following this, various symmetry properties for basket, maximum and exchange options are discussed alongside with their geometric interpretations and some decomposition results for more general payoff functions.

Keywords: Multiasset derivative; Exchange option; Lévy process; Probabilistic symmetries; Zonoid; 60E07; 60G51; 91G20 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-319-02069-3_20

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DOI: 10.1007/978-3-319-02069-3_20

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