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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| Format: | Article |
| Language: | English |
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Wiley
2021-01-01
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| Series: | Journal of Mathematics |
| Online Access: | http://dx.doi.org/10.1155/2021/1451692 |
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| _version_ | 1832567433703981056 |
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| author | Panhong Cheng Zhihong Xu |
| author_facet | Panhong Cheng Zhihong Xu |
| author_sort | Panhong Cheng |
| collection | DOAJ |
| 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 |
| id | doaj-art-2652ee2dab874518b09d4f2df871f65d |
| institution | Kabale University |
| issn | 2314-4785 |
| language | English |
| publishDate | 2021-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Journal of Mathematics |
| spelling | doaj-art-2652ee2dab874518b09d4f2df871f65d2025-02-03T01:01:24ZengWileyJournal of Mathematics2314-47852021-01-01202110.1155/2021/1451692Pricing Vulnerable Options in the Bifractional Brownian Environment with JumpsPanhong Cheng0Zhihong Xu1Business SchoolPublic Teaching DepartmentIn 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).http://dx.doi.org/10.1155/2021/1451692 |
| spellingShingle | Panhong Cheng Zhihong Xu Pricing Vulnerable Options in the Bifractional Brownian Environment with Jumps Journal of Mathematics |
| title | 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_short | Pricing Vulnerable Options in the Bifractional Brownian Environment with Jumps |
| title_sort | pricing vulnerable options in the bifractional brownian environment with jumps |
| url | http://dx.doi.org/10.1155/2021/1451692 |
| work_keys_str_mv | AT panhongcheng pricingvulnerableoptionsinthebifractionalbrownianenvironmentwithjumps AT zhihongxu pricingvulnerableoptionsinthebifractionalbrownianenvironmentwithjumps |