Quantile hedging for basket derivatives
Volume 39 / 2012
Applicationes Mathematicae 39 (2012), 103-127
MSC: 91B30, 91B24, 91B70.
DOI: 10.4064/am39-1-7
Abstract
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.
