about two-asset options

Posted by Ferdinando M. Ametrano-3 on
URL: http://quantlib.414.s1.nabble.com/Multi-asset-options-tp2771p2778.html

Hi Neil

I've extended your code to handle dividends: it was nothing more than using
forward values instead of spot (and variances instead of vols).

Forward/variance is always my favorite approach vs spot/vol for European
options (and spot/variance for American options). This is also because it
removes any problem about the definition of time to maturity which is
dependent on the day count, and one can have different day count
conventions for the volatility, risk-free rate, and dividend term structures.

I've also added few test cases from "Option Pricing Formulas", Haug, 1998
to the test suite.

For those interested, it would be worthwhile to compare the current
two-asset code with the single-asset blackformula.hpp: it shows the natural
path toward American and European digital two-asset options with
cash/asset-at-hit/expiry payoff.

Thank you very much for your contribution, I look forward to the Monte
Carlo simulation engine.

ciao -- Nando