Pricing Vulnerable Options in the Bifractional Brownian Environment with Jumps

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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Autores principales: Panhong Cheng, Zhihong Xu
Formato: article
Lenguaje:EN
Publicado: Hindawi Limited 2021
Materias:
Mathematics
QA1-939
Acceso en línea:https://doaj.org/article/2652ee2dab874518b09d4f2df871f65d
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spelling oai:doaj.org-article:2652ee2dab874518b09d4f2df871f65d2021-11-15T01:19:53ZPricing Vulnerable Options in the Bifractional Brownian Environment with Jumps2314-478510.1155/2021/1451692https://doaj.org/article/2652ee2dab874518b09d4f2df871f65d2021-01-01T00:00:00Zhttp://dx.doi.org/10.1155/2021/1451692https://doaj.org/toc/2314-4785In 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).Panhong ChengZhihong XuHindawi LimitedarticleMathematicsQA1-939ENJournal of Mathematics, Vol 2021 (2021)
institution DOAJ
collection DOAJ
language EN
topic Mathematics
QA1-939
spellingShingle Mathematics
QA1-939
Panhong Cheng
Zhihong Xu
Pricing Vulnerable Options in the Bifractional Brownian Environment with Jumps
description 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).
format article
author Panhong Cheng
Zhihong Xu
author_facet Panhong Cheng
Zhihong Xu
author_sort Panhong Cheng
title Pricing Vulnerable Options in the Bifractional Brownian Environment with Jumps
title_short Pricing Vulnerable Options in the Bifractional Brownian Environment with Jumps
title_full Pricing Vulnerable Options in the Bifractional Brownian Environment with Jumps
title_fullStr Pricing Vulnerable Options in the Bifractional Brownian Environment with Jumps
title_full_unstemmed Pricing Vulnerable Options in the Bifractional Brownian Environment with Jumps
title_sort pricing vulnerable options in the bifractional brownian environment with jumps
publisher Hindawi Limited
publishDate 2021
url https://doaj.org/article/2652ee2dab874518b09d4f2df871f65d
work_keys_str_mv AT panhongcheng pricingvulnerableoptionsinthebifractionalbrownianenvironmentwithjumps
AT zhihongxu pricingvulnerableoptionsinthebifractionalbrownianenvironmentwithjumps
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