Pricing Vulnerable Options in the Bifractional Brownian Environment with Jumps
In this paper, we study the valuation of European vulnerable options where the underlying asset price and the firm value of the counterparty both follow the bifractional Brownian motion with jumps, respectively. We assume that default event occurs when the firm value of the counterparty is less than...
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| Auteurs principaux: | , |
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| Format: | article |
| Langue: | EN |
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Hindawi Limited
2021
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| Accès en ligne: | https://doaj.org/article/2652ee2dab874518b09d4f2df871f65d |
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| Résumé: | In this paper, we study the valuation of European vulnerable options where the underlying asset price and the firm value of the counterparty both follow the bifractional Brownian motion with jumps, respectively. We assume that default event occurs when the firm value of the counterparty is less than the default boundary. By using the actuarial approach, analytic formulae for pricing the European vulnerable options are derived. The proposed pricing model contains many existing models such as Black–Scholes model (1973), Merton jump-diffusion model (1976), Klein model (1996), and Tian et al. model (2014). |
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