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sunil100
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Joined: November 13th, 2003, 11:14 am

Correlation Skew

May 2nd, 2006, 2:11 pm

Does anyone know of any papers or work on incorporating correlation skew into pricing models on baskets of equities. There are a number of equity basket options whose pricing is very sensitive to correlation, i.e. barriers which are triggered by the best/worst performing of a basket of equities.....altiplanos for example. Many Thanks
 
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sunil100
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Joined: November 13th, 2003, 11:14 am

Correlation Skew

June 1st, 2006, 11:56 am

Surely someone must have an idea.....??? Many thanks
Last edited by sunil100 on May 31st, 2006, 10:00 pm, edited 1 time in total.
 
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figaro
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Joined: October 3rd, 2005, 5:49 pm

Correlation Skew

June 2nd, 2006, 11:20 am

Andersen, L., Sidenius, J., and Basu, S. (2003) All hedges in one basket, Banc of America Securities, New York.I think it came out in the Risk magazine.
 
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eye51
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Joined: August 5th, 2003, 11:35 am

Correlation Skew

June 2nd, 2006, 11:48 am

Can't you use the work of Avellaneda ? Look under "downloadable papers", "Reconstruction of Volatility: Pricing index options using the steepest-descent approximation"