Hi all, I've got asked this question again in interview, and I mean how large should a dt be chosen, in terms of precision or efficiency. Do you know the answer or can you refer me to any relevant material?

<t>Sorry Vladimir, found some mistakes... Actually the underlying is a basket of two assets ( S1+S2 ), but not S1*S2. In BS, I mean the geometric Brownian Motion, corr (dS1/S1, dS2/S2) = corr (dW1, dW2) = rho dt , which is what I meant by "return correlation". But this does not make it right for Hes...

Thx Vladimir, I have heard similar words from other people as well. You know, the traders thought you can work anything out in your head. How sad...

<t>Now I am doing the pricing by Monte Carloconsider a baskets of simply two assets, equally weighted, under Heston..Asset 1:dS1/S1=nu1*dt+sqrt(V1)*dW1V1=k1(theta1-V1)*dt+sqrt(V1)*sigma1*dW1_dW1*dW1_ = rho1*dtAsset 2:dS2/S2=nu2*dt+sqrt(V2)*dW2V2=k2(theta2-V2)*dt+sqrt(V2)*sigma2*dW2_dW2*dW2_ = rho2*d...

<t>Thank you guys so much! I will look into these papers at once!Now I am doing the pricing by Monte Carlo, but still a problem...consider a baskets of simply two assets, equally weighted, under Heston..Asset 1:dS1/S1=nu1*dt+sqrt(V1)*dW1V1=k1(theta1-V1)*dt+sqrt(V1)*sigma1*dW1_dW1*dW1_ = rho1*dtAsset...

Anybody know any paper/book about pricing basket option under Heston model? How does Heston model look like when modeling multi-assets with non-zero correlations?Thanks for the help.

<t>Thx Alan,You are right. It is a project suggested by trading people and I am quite confused on some points (probably because being lack of experience). So, I just wanna get some ideas from others before talking to them, since I have done little about basket before. I know some general things abou...

<t>Hi everybody, I am totally new here.Does anybody have experience of pricing basket options under Heston model? A project suggests that the 'Black-Scholes correlations might transform when it moves to Heston model'. I think the correlation here refers to the those between assets in the basket. Doe...

<t>Hi everybody, I am totally new here.Does anybody have experience of pricing basket options under Heston model? A project suggests that the 'Black-Scholes correlations might transform when it moves to Heston model'. I think the correlation here refers to the those between assets in the basket. Doe...