The problem of quantile hedging for basket derivatives in the Black-Scholes model with correlation is considered. Explicit formulas for the probability maximizing function and the cost reduction function are derived. Applicability of the results to the widely traded derivatives like digital, quantos, outperformance and spread options is shown.
@article{bwmeta1.element.bwnjournal-article-doi-10_4064-am39-1-7,
author = {Micha\l\ Barski},
title = {Quantile hedging for basket derivatives},
journal = {Applicationes Mathematicae},
volume = {39},
year = {2012},
pages = {103-127},
zbl = {1232.91643},
language = {en},
url = {http://dml.mathdoc.fr/item/bwmeta1.element.bwnjournal-article-doi-10_4064-am39-1-7}
}
Michał Barski. Quantile hedging for basket derivatives. Applicationes Mathematicae, Tome 39 (2012) pp. 103-127. http://gdmltest.u-ga.fr/item/bwmeta1.element.bwnjournal-article-doi-10_4064-am39-1-7/