Pricing Basket Options by Polynomial Approximations

[摘要] 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.

[学科分类] 应用数学