Baxter and Rennie explain the Mathematics of these Options by alluding to Stochastic Calculus in n-dimensional shape e.g the SDE's for the discounted Dollar worth of the sterling bond on page 124 is done with reference to the n-factor Ito's formula on page 185. However, the Acted notes seem not to worry about the rigour. Does this mean we are not expected to derive the SDE's on page 124 and other concepts involving n-dimensional Stochastic Calculus?
B&R Section 4.5 is not on the list of required reading, so is not directly examinable. However, as Quantos are covered briefly in Chapter 9, this section of B&R is included as optional reading in our list on p2 of that chapter. We think this material is worth a quick look at for background info, but please don't get bogged down in it.
