finMath lib documentation
net.finmath.montecarlo.assetderivativevaluation.products

• All Implemented Interfaces:
Product, AssetMonteCarloProduct, MonteCarloProduct

public class BasketOption
extends AbstractAssetMonteCarloProduct
Implements valuation of a European option on a basket of asset. Given a model for asset $$S_{i}$$, the European option with basket weights $$\alpha_{i}$$, strike K, maturity T pays $max\left( \sum_{i} \alpha_{i} S_{i}(T) - K , 0 \right)$ in T. Note that the specification of $$\alpha_{i}$$ and $$K$$ allows to construct some special cases, like
• a European option $$\alpha_{1} = 1$$, $$\alpha_{j} = 0$$ for $$j \neq 1$$
• an exchange option $$\alpha_{1} = 1$$, $$\alpha_{2} = -1$$, $$K = 0$$
Version:
1.0
Author:
Christian Fries
• ### Constructor Summary

Constructors
Constructor and Description
BasketOption(double maturity, double strike, double[] weights)
Construct a product representing an European option on an asset S (where S the asset with index 0 from the model - single asset case).
• ### Method Summary

All Methods
Modifier and Type Method and Description
RandomVariable getValue(double evaluationTime, AssetModelMonteCarloSimulationModel model)
This method returns the value random variable of the product within the specified model, evaluated at a given evalutationTime.
• ### Methods inherited from class net.finmath.montecarlo.assetderivativevaluation.products.AbstractAssetMonteCarloProduct

getValue
• ### Methods inherited from class net.finmath.montecarlo.AbstractMonteCarloProduct

getCurrency, getValue, getValue, getValues, getValues, getValues, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData, toString
• ### Methods inherited from class java.lang.Object

clone, equals, finalize, getClass, hashCode, notify, notifyAll, wait, wait, wait
• ### Constructor Detail

public BasketOption(double maturity,
double strike,
double[] weights)
Construct a product representing an European option on an asset S (where S the asset with index 0 from the model - single asset case).
Parameters:
maturity - The maturity T in the option payoff $$max\left( \sum_{i} \alpha_{i} S_{i}(T) - K , 0 \right)$$.
strike - The strike K in the option payoff $$max\left( \sum_{i} \alpha_{i} S_{i}(T) - K , 0 \right)$$.
weights - The weights $$\alpha_{i}$$ in the option payof $$max\left( \sum_{i} \alpha_{i} S_{i}(T) - K , 0 \right)$$.
• ### Method Detail

• #### getValue

public RandomVariable getValue(double evaluationTime,
AssetModelMonteCarloSimulationModel model)
throws CalculationException
This method returns the value random variable of the product within the specified model, evaluated at a given evalutationTime. Note: For a lattice this is often the value conditional to evalutationTime, for a Monte-Carlo simulation this is the (sum of) value discounted to evaluation time. Cashflows prior evaluationTime are not considered.
Specified by:
getValue in interface AssetMonteCarloProduct
Specified by:
getValue in class AbstractAssetMonteCarloProduct
Parameters:
evaluationTime - The time on which this products value should be observed.
model - The model used to price the product.
Returns:
The random variable representing the value of the product discounted to evaluation time
Throws:
CalculationException - Thrown if the valuation fails, specific cause may be available via the cause() method.