In order to price multivariate derivatives, there is need for a multivariate stock price model. To keep the simplicity and attractiveness of the one-dimensional Black & Scholes model, one often considers a multivariate model where each individual stock follows a Black & Scholes model, but the...

In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the contract's maturity the contract is perfectly hedged. We...

In this paper we employ a one-factor Lévy model to determine basket option prices. More precisely, basket option prices are determined by replacing the distribution of the real basket with an appropriate approximation. For the approximate basket we determine the underlying characteristic...