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A Solution to the Multidimensionality in Option Pricing

Author

Listed:
  • Moawia Alghalith

    (UWI, St Augustine)

  • Wing-Keung Wong

    (Department of Finance, Fintech Center, and Big Data Research Center, Asia University; Department of Medical Research, China Medical University Hospital, Taiwan; Business, Economic and Public Policy Research Centre, Hong Kong Shue Yan University; The Economic Growth Centre, Nanyang Technological University)

Abstract

We provide an accurate, simple formula for pricing multidimensional European options. The formula is as simple as the Black-Scholes formula. Therefore, the (costly) computational methods are needless. Moreover, our method allows the calculation of the implied volatility of the underlying asset of a multidimensional option.

Suggested Citation

  • Moawia Alghalith & Wing-Keung Wong, 2025. "A Solution to the Multidimensionality in Option Pricing," Economic Growth Centre Working Paper Series 2505, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    • Handle: RePEc:nan:wpaper:2505
    as

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    File URL: https://web.hss.ntu.edu.sg/egc/wp/2025/2025-05.pdf
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    References listed on IDEAS

    as
    1. Deelstra, G. & Liinev, J. & Vanmaele, M., 2004. "Pricing of arithmetic basket options by conditioning," Insurance: Mathematics and Economics, Elsevier, vol. 34(1), pages 55-77, February.
    2. Gorton, Gary B & Pennacchi, George G, 1993. "Security Baskets and Index-Linked Securities," The Journal of Business, University of Chicago Press, vol. 66(1), pages 1-27, January.
    3. Griselda Deelstra & Jan Liinev & Michèle Vanmaele, 2004. "Pricing of arithmetic basket options by conditioning," ULB Institutional Repository 2013/7600, ULB -- Universite Libre de Bruxelles.
    4. Moawia Alghalith & Christos Floros & Konstantinos Gkillas, 2020. "Estimating Stochastic Volatility under the Assumption of Stochastic Volatility of Volatility," Risks, MDPI, vol. 8(2), pages 1-15, April.
    5. Chen, X. & Deelstra, G. & Dhaene, J. & Vanmaele, M., 2008. "Static super-replicating strategies for a class of exotic options," Insurance: Mathematics and Economics, Elsevier, vol. 42(3), pages 1067-1085, June.
    Full references (including those not matched with items on IDEAS)

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