Multivariate Option Pricing Using Copulae

  title={Multivariate Option Pricing Using Copulae},
  author={Carole Bernard and Claudia Czado},
The complexity of financial products significantly increased in the past ten years. In this paper we investigate the pricing of basket options and more generally of complex exotic contracts depending on multiple indices. Our approach assumes that the underlying assets evolve as dependent GARCH(1,1) processes and it involves to model the dependency among the assets using a copula based on pair-copula constructions. Unlike most previous studies on this topic, we do not assume that the dependence… CONTINUE READING

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