Page 1 of 1
Correlation Skew
Posted: May 2nd, 2006, 2:11 pm
by sunil100
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
Correlation Skew
Posted: June 1st, 2006, 11:56 am
by sunil100
Surely someone must have an idea.....??? Many thanks
Correlation Skew
Posted: June 2nd, 2006, 11:20 am
by figaro
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.
Correlation Skew
Posted: June 2nd, 2006, 11:48 am
by eye51
Can't you use the work of Avellaneda ? Look under "downloadable papers", "Reconstruction of Volatility: Pricing index options using the steepest-descent approximation"