A derivative whose payoff depends on the performance of a set of assets, and implicitly on the correlation among the underlying returns. Examples of multi-asset derivatives are multi-asset options and multi-asset cliquets.
A multi-asset option, per se, may involve different mechanisms. For a European multi-asset option, there are three broad types: rainbow options, basket options and quanto options. A holder of a currency basket option has the right, without the obligation, to receive certain currencies in exchange for a base currency, applying either the spot market rate or a pre-agreed rate of exchange. This option allows market players to deal with multicurrency cash flows (cash flows denominated in multiple assets- the currencies).
