What question did this study set out to answer?

The aim is to present a pricing formula that incorporates default risk into vulnerable basket-spread options using multivariate variance gamma models.

June 3, 2026

Snapshots of Pricing Vulnerable Basket-Spread Options in Multivariate Variance Gamma Models

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The aim is to present a pricing formula that incorporates default risk into vulnerable basket-spread options using multivariate variance gamma models.
Developed a pricing formula based on multivariate variance gamma return behavior.
Compared the derived prices with those obtained from Monte Carlo simulations.
The pricing formula closely matches Monte Carlo prices, demonstrating its effectiveness and accuracy.

Abstract

Quickly apply original, key PMR-published papers with Snapshots—a short article companion that distills PMR research into compressed, digestible takeaways, so you can put the paper’s core ideas to work in your investment process—fast. This Snapshot article is based on research arguing that a tractable pricing formula for vulnerable basket-spread options can incorporate default risk and multivariate VG return behavior while generally matching Monte Carlo prices closely.

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Derived from original PMR research written by Xianda Qian, Qin Wang, and Xingchun Wang using AI and an editor

Snapshots of Pricing Vulnerable Basket-Spread Options in Multivariate Variance Gamma Models

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