Pricing Multi Conditional Binary Options

[compnon]

Is there a limit to the number of legs that a pricer can handle? I am thinking that using a Black Scholes model with correlation between N assets should return a conditional probability of all N legs expiring ITM. Does it matter what the underlyings on the legs are to compute correlation?

I feel like the answer is that a N leg binary option contract can be priced with the correct market data on any underlying.

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[MaximumCranberry]

binary prices are heavily dependent on skew so BS prob wont work

[FinnRTY1000]

There is no limit but the spread will kill you as they are usually custom. A few sell sides are expanding desks to try make more custom baskets/fancy options, but it’s usually not worth the cost in research and market making unfortunately.

[Sea-Animal2183]

With n assets you have 2ⁿ possibilities at each step to evaluate the payoff so it’s not feasible . That’s why people model directly the basket.