Note on multidimensional Breeden-Litzenberger representation for state price densities

DOI10.1007/S11579-014-0113-5zbMATH Open1287.91147arXiv1305.5963OpenAlexW2055118193MaRDI QIDQ2452152FDOQ2452152

Authors: Jarno Talponen, Lauri Viitasaari 

Publication date: 30 May 2014

Published in: Mathematics and Financial Economics (Search for Journal in Brave)

Abstract: In this note, we consider European options of type $h(X_T^1,X_T^2,ldots,X_T^n)$ depending on several underlying assets. We give a multidimensional version of the result of Breeden and Litzenberger cite{Breeden} on the relation between derivatives of the call price and the risk-neutral density of the underlying asset. The pricing measure is assumed to be absolutely continuous with respect to the Lebesgue measure on the state space.

Full work available at URL: https://arxiv.org/abs/1305.5963

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zbMATH Keywords

basket optionsoption valuationrainbow optionsBreeden-Litzenberger representationoptions of multidimensional assetsstate price densities

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20)

Cites Work

• Semiparametric modeling of implied volatility.
• Mathematical methods for financial markets.
• Spanning, valuation and options
• Multi-asset stochastic local variance contracts

Cited In (3)

• Improved robust price bounds for multi-asset derivatives under market-implied dependence information
• Pricing multivariate European equity option using Gaussians mixture distributions and EVT-based copulas
• On certain representations of pricing functionals

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