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A comparison of three analytical approximations for basket option valuation
Three prominent analytical approximations for pricing basket options,by Levy (1992), Ju (2002) and Deelstra et aI. (2004), are tested for performance and accuracy. Sensitivity analysis shows that all three have greater errors in high volatility and long maturity environments, while Deelstra has weak...
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| Format: | Thesis |
| Language: | English |
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Department of Mathematics and Applied Mathematics
2016
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| _version_ | 1867613181643325440 |
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| access_status_str | Open Access |
| author | Hagspihl, Christoph |
| author2 | Floor, Justin |
| author_browse | Floor, Justin Hagspihl, Christoph |
| author_facet | Floor, Justin Hagspihl, Christoph |
| author_sort | Hagspihl, Christoph |
| collection | Thesis |
| description | Three prominent analytical approximations for pricing basket options,by Levy (1992), Ju (2002) and Deelstra et aI. (2004), are tested for performance and accuracy. Sensitivity analysis shows that all three have greater errors in high volatility and long maturity environments, while Deelstra has weaknesses with small correlation and baskets with few stocks. Deelstra and Levy show tendencies to underprice and overprice respectively, while Ju's errors are more consistently around the true price. A mathematical understanding of the three techniques is also developed. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/18690 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:32:03.909Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2016 |
| publishDateRange | 2016 |
| publishDateSort | 2016 |
| publisher | Department of Mathematics and Applied Mathematics |
| publisherStr | Department of Mathematics and Applied Mathematics |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/18690 A comparison of three analytical approximations for basket option valuation Hagspihl, Christoph Floor, Justin Financial Mathematics Three prominent analytical approximations for pricing basket options,by Levy (1992), Ju (2002) and Deelstra et aI. (2004), are tested for performance and accuracy. Sensitivity analysis shows that all three have greater errors in high volatility and long maturity environments, while Deelstra has weaknesses with small correlation and baskets with few stocks. Deelstra and Levy show tendencies to underprice and overprice respectively, while Ju's errors are more consistently around the true price. A mathematical understanding of the three techniques is also developed. 2016-04-07T10:17:46Z 2016-04-07T10:17:46Z 2013 Master Thesis Masters MPhil http://hdl.handle.net/11427/18690 eng application/pdf Department of Mathematics and Applied Mathematics Faculty of Science University of Cape Town |
| spellingShingle | Financial Mathematics Hagspihl, Christoph A comparison of three analytical approximations for basket option valuation |
| thesis_degree_str | Master's |
| title | A comparison of three analytical approximations for basket option valuation |
| title_full | A comparison of three analytical approximations for basket option valuation |
| title_fullStr | A comparison of three analytical approximations for basket option valuation |
| title_full_unstemmed | A comparison of three analytical approximations for basket option valuation |
| title_short | A comparison of three analytical approximations for basket option valuation |
| title_sort | comparison of three analytical approximations for basket option valuation |
| topic | Financial Mathematics |
| url | http://hdl.handle.net/11427/18690 |
| work_keys_str_mv | AT hagspihlchristoph acomparisonofthreeanalyticalapproximationsforbasketoptionvaluation AT hagspihlchristoph comparisonofthreeanalyticalapproximationsforbasketoptionvaluation |