Pricing of Fixed-Strike Lookback Options on Assets with Default Risk
Joint Authors
Yoon, Ji-Hun
Choi, Sun-Yong
Jeon, Junkee
Source
Mathematical Problems in Engineering
Issue
Vol. 2019, Issue 2019 (31 Dec. 2019), pp.1-10, 10 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2019-01-16
Country of Publication
Egypt
No. of Pages
10
Main Subjects
Abstract EN
In over-the-counter markets, many options on defaultable instruments are influenced by default risks emanating from the possibility that the option writer may not fulfill its contractual obligations.
In this paper, we investigate the valuation of fixed-strike lookback options based on the issuer’s credit risk.
Using double Mellin transforms and the method of images, we have a closed-form solution to fixed-strike lookback options with a default risk.
Furthermore, we analyze the values of the vulnerable fixed-strike lookback options with respect to the model parameters and also show that the Monte Carlo simulations and the Implicit Finite Difference Method converge to the closed-form solutions and this verifies the correctness of our formulas.
American Psychological Association (APA)
Choi, Sun-Yong& Yoon, Ji-Hun& Jeon, Junkee. 2019. Pricing of Fixed-Strike Lookback Options on Assets with Default Risk. Mathematical Problems in Engineering،Vol. 2019, no. 2019, pp.1-10.
https://search.emarefa.net/detail/BIM-1197612
Modern Language Association (MLA)
Choi, Sun-Yong…[et al.]. Pricing of Fixed-Strike Lookback Options on Assets with Default Risk. Mathematical Problems in Engineering No. 2019 (2019), pp.1-10.
https://search.emarefa.net/detail/BIM-1197612
American Medical Association (AMA)
Choi, Sun-Yong& Yoon, Ji-Hun& Jeon, Junkee. Pricing of Fixed-Strike Lookback Options on Assets with Default Risk. Mathematical Problems in Engineering. 2019. Vol. 2019, no. 2019, pp.1-10.
https://search.emarefa.net/detail/BIM-1197612
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1197612