Basket option
Encyclopedia
A basket option is a financial derivative
Derivative (finance)
A derivative instrument is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments, or payoffs, are to be made between the parties.Under U.S...

, more specifically an exotic option
Exotic option
In finance, an exotic option is a derivative which has features making it more complex than commonly traded products . These products are usually traded over-the-counter , or are embedded in structured notes....

, whose underlying
Underlying
In finance, the underlying of a derivative is an asset, basket of assets, index, or even another derivative, such that the cash flows of the derivative depend on the value of this underlying...

 is a (weighted) sum or average of different assets. Examples are index options
Stock market index option
Stock market index option is a type of option, which is a financial derivative. Index options may be tied to the price of either broad-based indexes like the S&P 500 Index or the Russell 3000 Index or to narrow-based indexes, which is an index that is limited to a particular industry like the...

, options on a portfolio, etc.
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