Valuation of vulnerable options using a bivariate Gram-Charlier approximation

DOI10.1007/S11147-024-09207-YMaRDI QIDQ6882913zbMATH OpenFDO

Authors Xinyue Ou, Xingchun Wang

Publication date 16 December 2025

Published in Review of Derivatives Research (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1007/S11147-024-09207-Y

zbMATH Keywords

default riskGram-Charlier approximationkurtosisskewnessvulnerable options

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20)

Cites work

• A closed form solution for vulnerable options with Heston's stochastic volatility
• A general closed form option pricing formula
• Applications of Gram-Charlier expansion and bond moments for pricing of interest rates and credit risk
• Arbitrage-free bilateral counterparty risk valuation under collateralization and application to credit default swaps
• Bakshi, Kapadia, and Madan (2003) risk-neutral moment estimators: a Gram-Charlier density approach
• Bilateral counterparty risk under funding constraints. I: Pricing
• Bilateral counterparty risk under funding constraints. II: CVA
• Gram-Charlier densities.
• Option pricing where the underlying assets follow a Gram/Charlier density of arbitrary order
• Pricing vulnerable options with stochastic volatility
• The valid regions of Gram-Charlier densities with high-order cumulants
• Valuation of vulnerable options with stochastic corporate liabilities in a mixed fractional Brownian motion environment

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