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Advanced Quantitative Finance with C++ by Alonso Peña Ph.D

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Advanced example – equity basket

In this second, more advanced example, we will illustrate the implementation of the pricing of an equity basket option, with the payoff being the largest between two asset values at maturity. The details of the approach are shown in the following Bento Box template:

Advanced example – equity basket

Bento Box template for advanced example: equity basket

Our aim is to compute the option premium as before.

The details of the contract are in Box 1, particularly the payoff function is as follows:

Advanced example – equity basket

Note that this being a basket option with two assets, we will ...

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