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2021
Simplified Approach to Valuation of Vulnerable Exchange Option under a Reduced-Form Model
Simplified Approach to Valuation of Vulnerable Exchange Option under a Reduced-Form Model
영남수학회
논문정보
- Publisher
- East Asian Mathematical Journal
- Issue Date
- 2021-01-31
- Keywords
- -
- Citation
- -
- Source
- -
- Journal Title
- -
- Volume
- 37
- Number
- 1
- Start Page
- 79
- End Page
- 85
- DOI
- ISSN
- 12266973
Abstract
In this paper, we investigate the valuation of vulnerable exchange option that has credit risk of option issuer. The reduced-form model is used to model credit risk. We assume that credit event is determined by the jump of the counting process with stochastic intensity, which follows the mean reverting process. We propose a simple approach to derive the closed-form pricing formula of vulnerable exchange option under the reduced-form model and provide the pricing formula as the standard normal cumulative function.
- 전남대학교
- KCI
- East Asian Mathematical Journal
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