Valuation of European option with correlated credit risk and stochastic interest

被引：0
|
作者：
Shuzhen Tu
Yi Ma
Weiping Yang
Weiping Lv
Shiyin Li
机构：
[1] Longyan University,School of Mathematics and Information Engineering
[2] Xiamen University,School of Mathematics Science
来源：
Microsystem Technologies | 2021年 / 27卷
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摘要：
In this paper, we derive an explicit pricing formula for vulnerable call options where the credit risk is handled in a hybrid model. We describe the process of default via a doubly stochastic Poisson process, and assume that the intensity process λ of the Poisson process follows a mean-reverting process. Moreover, the default intensity process λ mutually correlates with the underlying asset and the value of the firm. By applying a changing measure, closed-form solutions of the pricing formula are derived within a general Gaussian interest rate framework.
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页码：1619 / 1626
页数：7
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