Pricing vulnerable European options with dynamic correlation between market risk and credit risk
In this paper, we study the valuation of vulnerable European options incorporating the reduced-form approach, which models the credit default of the counterparty. We provide an analytical pricing model in which the components of the state processes, including the dynamics of the underlying asset val...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
KeAi Communications Co., Ltd.
2020-06-01
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| Series: | Journal of Management Science and Engineering |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S2096232020300160 |