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Document type:
Zeitschriftenaufsatz 
Author(s):
Escobar, M.; Krause, D.; Zagst, R. 
Non-TUM Co-author(s):
ja 
Cooperation:
international 
Title:
Stochastic Covariance and Dimension Reduction in the Pricing of Basket Options 
Abstract:
This paper presents a tailor-made method for dimension reduction aimed at approximating the price of basket options in the context of stochastic volatility and stochastic correlation. The methodology is built on a modification to the Principal Component Stochastic Volatility (PCSV) model, a stochastic covariance model that accounts for most stylized facts in prices. The method to reduce dimension is first derived theoretically. Afterwards the results are applied to a multivariate lognormal conte...    »
 
Keywords:
Principal Components, Basket Options, Stochastic Covariance 
Intellectual Contribution:
Discipline-based Research 
Journal title:
Review of Derivatives Research 
Year:
2016 
Journal volume:
19 
Journal issue:
Pages contribution:
165-200 
Reviewed:
ja 
Language:
en 
Status:
Verlagsversion / published 
TUM Institution:
Lehrstuhl für Finanzmathematik 
Format:
Text 
Key publication:
Nein 
Peer reviewed:
Nein 
International:
Ja 
Book review:
Nein 
Commissioned:
not commissioned 
Professional Journal:
Nein 
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