In this paper we present a new multi-asset pricing model, which is built upon
newly developed families of solvable multi-parameter single-asset diffusions
with a nonlinear smile-shaped volatility and an affine drift. Our multi-asset
pricing model arises by employing copula methods. In particular, all discounted
single-asset price processes are modeled as martingale diffusions under a
risk-neutral measure. The price processes are so-called UOU diffusions and they
are each generated by combining a variable (Ito) transformation with a measure
change performed on an underlying Ornstein-Uhlenbeck (Gaussian) process.
Consequently, we exploit the use of a normal bridge copula for coupling the
single-asset dynamics while reducing the distribution of the multi-asset price
process to a multivariate normal distribution. Such an approach allows us to
simulate multidimensional price paths in a precise and fast manner and hence to
price path-dependent financial derivatives such as Asian-style and Bermudan
options using the Monte Carlo method. We also demonstrate how to successfully
calibrate our multi-asset pricing model by fitting respective equity option and
asset market prices to the single-asset models and their return correlations
(i.e. the copula function) using the least-square and maximum-likelihood
estimation methods.