Any ideas on how to hedge for the correlation risk on this type of option ? I know it's not possible to fully hedge this type of risk that's why I just ask for ideas.....Thanks and happy new year

well the question is for this algorithm, by modifying the probability of your montecarlo, how do you know that you still have a risk neutral probability ?

an do you have a list of papers pertaining to this kind of options ?

Well , thank you all.

Anyone knows a method to apply perturbations to a correlation matrix, preserving the positive definiteness of the matrix and hopefully very low time consuming ? Thanks

Sorry to bother FDAXHunter, but once again my question, you're talking implied correlations but how do you back implied correlations of each component ( so the matrix of implied corr) from an index ?

And which method do you use to get back those average implied correlations ?

Hi,I'm currently trying to implement the malliavin approach to compute american option prices and the results seem very bad. Did someone try this ?Happy new year btw.bomba

Where can you find the paper of Herb Johnson ?Thanks