Speaker：Ping wu (Bank of Montreal)

Time：2025-4-14, 16:30

Location：Conference Room S204 at Experiment Building at Haiyun Campus

Abstract:

The talk presents closed-form approximation formulas for pricing basket options. We assume that the underlying asset prices follow geometric Brownian motions and the interest rate follows the one-factor Hull-White model. Under a given forward measure, we obtain the analytical lower and upper bounds of basket options. By finding a simple random variable to replace the sum of the lognormal random variables, we combine the conditioning and the moment matching approaches, and derive approximation formulas to price basket options. Numerical results illustrate that our results fall in the sharp lower and upper bounds of basket options and are consistent with Monte Carlo simulation results.