Explicit Pricing Formulas for European Option with Asset Exposed to Double Defaults Risk
Author
Source
Discrete Dynamics in Nature and Society
Issue
Vol. 2018, Issue 2018 (31 Dec. 2018), pp.1-8, 8 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2018-06-25
Country of Publication
Egypt
No. of Pages
8
Main Subjects
Abstract EN
We derive analytical formulas for European call and put options on underlying assets that are exposed to double defaults risks which include exogenous counterparty default risk and endogenous default risk.
The endogenous default risk leads the asset price to drop to zero and the exogenous counterparty default risk induces a drop in the asset price, but the asset can still be traded after this default time.
A novel technique is developed to evaluate the European call and put options by first conditioning on the predefault and the postdefault time and then obtaining the unconditional analytic formulas for their price.
We also compare the pricing results of our model with default-free option model and counterparty default risk option model.
American Psychological Association (APA)
He, Taoshun. 2018. Explicit Pricing Formulas for European Option with Asset Exposed to Double Defaults Risk. Discrete Dynamics in Nature and Society،Vol. 2018, no. 2018, pp.1-8.
https://search.emarefa.net/detail/BIM-1152851
Modern Language Association (MLA)
He, Taoshun. Explicit Pricing Formulas for European Option with Asset Exposed to Double Defaults Risk. Discrete Dynamics in Nature and Society No. 2018 (2018), pp.1-8.
https://search.emarefa.net/detail/BIM-1152851
American Medical Association (AMA)
He, Taoshun. Explicit Pricing Formulas for European Option with Asset Exposed to Double Defaults Risk. Discrete Dynamics in Nature and Society. 2018. Vol. 2018, no. 2018, pp.1-8.
https://search.emarefa.net/detail/BIM-1152851
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1152851