Posts Tagged ‘ risk neutral ’

Pricing options on multiple assets (part 1) with trees

June 19, 2012
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Pricing options on multiple assets (part 1) with trees

I am a big fan of trees. It is a very nice way to see how financial pricing works, for derivatives. An with a matrix-based language (R for instance), it is extremely simple to compute almost everything. Even multiple assets options. Let us see how ...

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Basket Option Pricing: Step by Step

May 8, 2010
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Basket Option Pricing: Step by Step

I find options fascinating because they deal with the abstract ideas of volatility and correlation, both of which are unobservable and can often seem like wild animal spirits (take the current stock market as an example). Understanding these subtle concepts is never easy, but it is essential in pricing some of the more exotic

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