equity basket option

financepy.products.equity.equity_basket_option

Class

EquityBasketOption

EquityBasketOption(
    expiry_dt: Date,
    strike_price: float,
    opt_type: OptionTypes,
    num_assets: int,
) -> None

A EquityBasketOption is a contract to buy a put or a call option on an equally weighted portfolio of different stocks, each with its own price, volatility and dividend yield. An analytical and monte-carlo pricing model have been implemented for a European style option.

Methods

value


value(
    self,
    value_dt: Date,
    stock_prices: numpy.ndarray,
    discount_curve: DiscountCurve,
    dividend_curves: list,
    volatilities: numpy.ndarray,
    correlations: numpy.ndarray,
)

Basket valuation using a moment matching method to approximate the effective variance of the underlying basket value. This approach is able to handle a full rank correlation structure between the individual assets.

value_mc


value_mc(
    self,
    value_dt: Date,
    stock_prices: numpy.ndarray,
    discount_curve: DiscountCurve,
    dividend_curves: list,
    volatilities: numpy.ndarray,
    corr_matrix: numpy.ndarray,
    num_paths: int = 10000,
    seed: int = 4242,
)

Valuation of the EquityBasketOption using a Monte-Carlo simulation of stock prices assuming a GBM distribution. Cholesky decomposition is used to handle a full rank correlation structure between the individual assets. The num_paths and seed are pre-set to default values but can be overwritten.

Generated automatically from the FinancePy source code. Do not edit this file manually.