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Discrete Dynamics in Nature and Society
Volume 2016, Article ID 8035746, 9 pages
Research Article

The European Vulnerable Option Pricing with Jumps Based on a Mixed Model

School of Economics and Management, Southeast University, Nanjing 211189, China

Received 9 September 2016; Accepted 22 November 2016

Academic Editor: Chris Goodrich

Copyright © 2016 Chao Wang et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


In this paper, we combine the reduced-form model with the structural model to discuss the European vulnerable option pricing. We define that the default occurs when the default process jumps or the corporate goes bankrupt. Assuming that the underlying asset follows the jump-diffusion process and the default follows the Vasicek model, we can have the expression of European vulnerable option. Then we use the measure transformation and martingale method to derive the explicit solution of it.