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Multiasset Derivatives and Joint Distributions of Asset Prices

In: Inspired by Finance

Author

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  • Ilya Molchanov

    (University of Bern, Department of Mathematical Statistics and Actuarial Science)

  • Michael Schmutz

    (University of Bern, Department of Mathematical Statistics and Actuarial Science)

Abstract

Several of multiasset derivatives like basket options or options on the weighted maximum of assets exhibit the property that their prices determine uniquely the underlying asset distribution. Related to that the question how to retrieve this distributions from the corresponding derivatives quotes will be discussed. On the contrary, the prices of exchange options do not uniquely determine the underlying distributions of asset prices and the extent of this non-uniqueness can be characterised. The discussion is related to a geometric interpretation of multiasset derivatives as support functions of convex sets. Following this, various symmetry properties for basket, maximum and exchange options are discussed alongside with their geometric interpretations and some decomposition results for more general payoff functions.

Suggested Citation

  • Ilya Molchanov & Michael Schmutz, 2014. "Multiasset Derivatives and Joint Distributions of Asset Prices," Springer Books, in: Yuri Kabanov & Marek Rutkowski & Thaleia Zariphopoulou (ed.), Inspired by Finance, edition 127, pages 439-459, Springer.
    • Handle: RePEc:spr:sprchp:978-3-319-02069-3_20
    DOI: 10.1007/978-3-319-02069-3_20
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