Show that a portfolio of holding various single-asset options with the same date of expiration is worth at least as much as a single option on the portfolio of the same number of units of each of the underlying assets. The single option is called a basket option. In mathematical representation, say for European call options, we have 

where N is the total number of options in the portfolio, and ni is the number of units of asset i in the basket.

Transcribed Image Text:

N N N Σnici(Si, r; Xi) z c(Σπιδί, τη Σπιχ C i=1 i=l n; > 0,