Option pricing for path-dependent options with assets exposed to multiple defaults risk
Summary: 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.
- Pricing formula for exotic options with assets exposed to counterparty risk
- Explicit pricing formulas for European option with asset exposed to double defaults risk
- Pricing of fixed-strike lookback options on assets with default risk
- Explicit pricing formulas for vulnerable path-dependent options with early counterparty credit risk
- Pricing of forward-start options with default risks
- Convergence analysis and optimal strike choice for static hedges of general path-independent pay-offs
- Explicit pricing formulas for European option with asset exposed to double defaults risk
- scientific article; zbMATH DE number 1869208 (Why is no real title available?)
- scientific article; zbMATH DE number 6137478 (Why is no real title available?)
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- Stochastic calculus for finance. II: Continuous-time models.
- Stochastic control under progressive enlargement of filtrations and applications to multiple defaults risk management
- What happens after a default: the conditional density approach
- Explicit pricing formulas for European option with asset exposed to double defaults risk
- Pricing of fixed-strike lookback options on assets with default risk
- Pricing formula for exotic options with assets exposed to counterparty risk
- Pricing of forward-start options with default risks
- Explicit pricing formulas for vulnerable path-dependent options with early counterparty credit risk
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