Option Pricing for Path-Dependent Options with Assets Exposed to Multiple Defaults Risk
In the present paper, we derive analytical formulas for barrier and lookback options with underlying assets exposed to multiple defaults risks which include exogenous counterparty default risk and endogenous default risk. The endogenous default risk leads the asset price drop to zero and the exogeno...
Saved in:
| Main Author: | |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Wiley
2020-01-01
|
| Series: | Discrete Dynamics in Nature and Society |
| Online Access: | http://dx.doi.org/10.1155/2020/2418620 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1850210805717401600 |
|---|---|
| author | Taoshun He |
| author_facet | Taoshun He |
| author_sort | Taoshun He |
| collection | DOAJ |
| description | In the present paper, we derive analytical formulas for barrier and lookback options with underlying assets exposed to multiple defaults risks which include exogenous counterparty default risk and endogenous default risk. The endogenous default risk leads the asset price 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. An original technique is developed to valuate the barrier and lookback options by first conditioning on the predefault and the afterdefault time and then obtaining the unconditional analytic formulas for their price. We also compare the pricing results of our model with the default-free option model and exogenous counterparty default risk option model. |
| format | Article |
| id | doaj-art-8e2ba24821904774bc983a22713d84ed |
| institution | OA Journals |
| issn | 1026-0226 1607-887X |
| language | English |
| publishDate | 2020-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Discrete Dynamics in Nature and Society |
| spelling | doaj-art-8e2ba24821904774bc983a22713d84ed2025-08-20T02:09:41ZengWileyDiscrete Dynamics in Nature and Society1026-02261607-887X2020-01-01202010.1155/2020/24186202418620Option Pricing for Path-Dependent Options with Assets Exposed to Multiple Defaults RiskTaoshun He0Numerical Simulation Key Laboratory of Sichuan Province, College of Mathematics and Information Science, Neijiang Normal University, Neijiang 641110, ChinaIn the present paper, we derive analytical formulas for barrier and lookback options with underlying assets exposed to multiple defaults risks which include exogenous counterparty default risk and endogenous default risk. The endogenous default risk leads the asset price 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. An original technique is developed to valuate the barrier and lookback options by first conditioning on the predefault and the afterdefault time and then obtaining the unconditional analytic formulas for their price. We also compare the pricing results of our model with the default-free option model and exogenous counterparty default risk option model.http://dx.doi.org/10.1155/2020/2418620 |
| spellingShingle | Taoshun He Option Pricing for Path-Dependent Options with Assets Exposed to Multiple Defaults Risk Discrete Dynamics in Nature and Society |
| title | Option Pricing for Path-Dependent Options with Assets Exposed to Multiple Defaults Risk |
| title_full | Option Pricing for Path-Dependent Options with Assets Exposed to Multiple Defaults Risk |
| title_fullStr | Option Pricing for Path-Dependent Options with Assets Exposed to Multiple Defaults Risk |
| title_full_unstemmed | Option Pricing for Path-Dependent Options with Assets Exposed to Multiple Defaults Risk |
| title_short | Option Pricing for Path-Dependent Options with Assets Exposed to Multiple Defaults Risk |
| title_sort | option pricing for path dependent options with assets exposed to multiple defaults risk |
| url | http://dx.doi.org/10.1155/2020/2418620 |
| work_keys_str_mv | AT taoshunhe optionpricingforpathdependentoptionswithassetsexposedtomultipledefaultsrisk |