Table of Contents Author Guidelines Submit a Manuscript
Discrete Dynamics in Nature and Society
Volume 2016, Article ID 8035746, 9 pages
http://dx.doi.org/10.1155/2016/8035746
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.

Linked References

  1. R. C. Merton, “On the pricing of corporate debt: the risk structure of interest rates,” The Journal of Finance, vol. 29, no. 2, pp. 449–470, 1974. View at Publisher · View at Google Scholar
  2. F. Black and J. C. Cox, “Valuing corporate securities: some effects of bond indenture provisions,” The Journal of Finance, vol. 31, no. 2, pp. 351–367, 1976. View at Publisher · View at Google Scholar
  3. H. Johnson and R. Stulz, “The pricing of options with default risk,” The Journal of Finance, vol. 42, no. 2, pp. 267–280, 1987. View at Publisher · View at Google Scholar
  4. F. A. Longstaff and E. S. Schwartz, “A simple approach to valuing risky fixed and floating rate debt,” The Journal of Finance, vol. 50, no. 3, pp. 789–819, 1995. View at Publisher · View at Google Scholar
  5. J. Hull and A. White, “The impact of default risk on the prices of options and other derivative securities,” Journal of Banking & Finance, vol. 19, no. 2, pp. 299–322, 1995. View at Publisher · View at Google Scholar · View at Scopus
  6. R. A. Jarrow and S. M. Turnbull, “The intersection of market and credit risk,” Journal of Banking & Finance, vol. 24, no. 1-2, pp. 271–299, 2000. View at Publisher · View at Google Scholar · View at Scopus
  7. D. Rich, “The valuation and behavior of black-scholes options subject to intertemporal default risk,” Review of Derivatives Research, vol. 1, no. 1, pp. 25–59, 1996. View at Publisher · View at Google Scholar · View at Scopus
  8. P. Klein, “Pricing black-scholes options with correlated credit risk,” Journal of Banking & Finance, vol. 20, no. 7, pp. 1211–1229, 1996. View at Publisher · View at Google Scholar · View at Scopus
  9. D. B. Madan and H. Unal, “Pricing the risks of default,” Review of Derivatives Research, vol. 2, no. 2-3, pp. 121–160, 1998. View at Google Scholar · View at Scopus
  10. D. Lando, “On cox processes and credit risky securities,” Review of Derivatives Research, vol. 2, no. 2-3, pp. 99–120, 1998. View at Google Scholar · View at Scopus
  11. D. Duffie and K. J. Singleton, “Modeling term structures of defaultable bonds,” Review of Financial Studies, vol. 12, no. 4, pp. 687–720, 1999. View at Publisher · View at Google Scholar · View at Scopus
  12. P. Klein and M. Inglis, “Pricing vulnerable European options when the option's payoff can increase the risk of financial distress,” Journal of Banking & Finance, vol. 25, no. 5, pp. 993–1012, 2001. View at Publisher · View at Google Scholar · View at Scopus
  13. M. Ammann, Credit Risk Valuation: Methods, Models and Applications, Springer Finance, Springer, Berlin, Germany, 2nd edition, 2002. View at MathSciNet
  14. C. Zhou, “The term structure of credit spreads with jump risk,” Journal of Banking & Finance, vol. 25, no. 11, pp. 2015–2040, 2001. View at Publisher · View at Google Scholar · View at Scopus
  15. C. H. Hui, C. Lo, and H. Lee, “Pricing Vulnerable Black-Scholes Options with Dynamic Default Barriers,” The Journal of Derivatives, vol. 10, no. 4, pp. 62–69, 2003. View at Publisher · View at Google Scholar
  16. P. Lakner and W. Liang, “Optimal investment in a defaultable bond,” Mathematics & Financial Economics, vol. 1, no. 3-4, pp. 283–310, 2008. View at Publisher · View at Google Scholar · View at Scopus
  17. W. Wang and W. Wang, “Pricing vulnerable options under a Markov-modulated regime switching model,” Communications in Statistics—Theory and Methods, vol. 39, no. 19, pp. 3421–3433, 2010. View at Publisher · View at Google Scholar · View at MathSciNet · View at Scopus
  18. L. Tchuindjo, “Closed-form solutions for pricing credit-risky bonds and bond options,” Applied Mathematics & Computation, vol. 217, no. 13, pp. 6133–6143, 2011. View at Publisher · View at Google Scholar · View at Scopus
  19. X. Su and W. Wang, “Pricing options with credit risk in a reduced form model,” Journal of the Korean Statistical Society, vol. 41, no. 4, pp. 437–444, 2012. View at Publisher · View at Google Scholar · View at MathSciNet · View at Scopus
  20. C. Wang, S. Zhou, and J. Yang, “The pricing of vulnerable options in a fractional Brownian motion environment,” Discrete Dynamics in Nature and Society, vol. 2015, Article ID 579213, 10 pages, 2015. View at Publisher · View at Google Scholar · View at Scopus
  21. J.-H. Yoon and J.-H. Kim, “The pricing of vulnerable options with double Mellin transforms,” Journal of Mathematical Analysis and Applications, vol. 422, no. 2, pp. 838–857, 2015. View at Publisher · View at Google Scholar · View at MathSciNet · View at Scopus
  22. F. A. Fard, “Analytical pricing of vulnerable options under a generalized jump-diffusion model,” Insurance: Mathematics and Economics, vol. 60, pp. 19–28, 2015. View at Publisher · View at Google Scholar · View at MathSciNet · View at Scopus
  23. X. Wang, “Analytical valuation of vulnerable options in a discrete-time framework,” Probability in the Engineering and Informational Sciences, 2016. View at Publisher · View at Google Scholar
  24. M.-K. Lee, S.-J. Yang, and J.-H. Kim, “A closed form solution for vulnerable options with Heston's stochastic volatility,” Chaos, Solitons & Fractals, vol. 86, pp. 23–27, 2016. View at Publisher · View at Google Scholar
  25. J. Jeon, J.-H. Yoon, and M. Kang, “Pricing vulnerable path-dependent options using integral transforms,” Journal of Computational and Applied Mathematics, vol. 313, pp. 259–272, 2017. View at Publisher · View at Google Scholar · View at MathSciNet