Vulnerable European option pricing with the time-dependent for double jump-diffusion process

LYU Li-juan; ZHANG Xing-yong

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Sep. 2015

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Article Navigation > Journal of East China Normal University (Natural Sciences) > 2014 > (1): 13-20, 26

LYU Li-juan, ZHANG Xing-yong. Vulnerable European option pricing with the time-dependent for double jump-diffusion process[J]. Journal of East China Normal University (Natural Sciences), 2014, (1): 13-20, 26.

Citation:

LYU Li-juan, ZHANG Xing-yong. Vulnerable European option pricing with the time-dependent for double jump-diffusion process[J]. Journal of East China Normal University (Natural Sciences), 2014, (1): 13-20, 26.

Citation:

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Vulnerable European option pricing with the time-dependent for double jump-diffusion process

1.
College of Sciences, China University of Mining and Technology, Xuzhou Jiangsu \ 221116, China

Received Date: 2013-03-01
Rev Recd Date: 2013-06-01
Publish Date: 2014-01-25

Abstract

Abstract

Based on Merton's structured credit risk model, derivatives pricing with rival unilateral default risk was studied in this paper. Assuming that underlying asset price and assets-liabilities of sellers follow double jump-diffusion process, where risk-free interest rate $r(t)$, volatility of asset $\sigma(t)$ and dividend yield $d(t)$ are time-dependent, vulnerable European options pricing model under double jump-diffusion process was established using the structured method, the analytical expressions of options price was obtained using It\^{o} lemma and the trunformation of the equivalent martingale measure.
- two jump-diffusion process,
- credit risks,
- vulnerable European option pricing

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References

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