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arXiv · 1410.6150

Pricing of European Basket Call Option under Exponential Ornstein-Uhlenbeck Process

Jingwei Liu·Jiwen Luo·Xing Chen
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Abstract

Pricing of European basket call option with n-assets and a bond is discussed in this paper, where all prices of n-assets and the bond are driven by Exponential Ornstein-Uhlenbeck processes. The close-form of European basket option pricing formula is derived. Utilizing with 1-order differential approximate numerical solution of stochastic differential equation (Milstein method), a simulation example of European basket option pricing with 3 assets is also given.

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BibTeXRIS

Jingwei Liu, Jiwen Luo, Xing Chen. 2015-06-04. Pricing of European Basket Call Option under Exponential Ornstein-Uhlenbeck Process. https://arxiv.org/abs/1410.6150

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