Pricing vulnerable options with market prices of common jump risks under regime-switching models
type: Item
instance of: scholarly article
title: Pricing vulnerable options with market prices of common jump risks under regime-switching models
zbMATH Open document ID: 1422.91700
DOI: 10.1155/2018/8545841
author: Miao Han
author: Huawei Niu
author: Xuefeng Song
author: Sheng-Wu Zhou
published in: Discrete Dynamics in Nature and Society
publication date: 2019-02-20T00:00:00Z
review text: Summary: This paper investigates the valuation of vulnerable European options considering the market prices of common systematic jump risks under regime-switching jump-diffusion models. The way of regime-switching Esscher transform is adopted to identify an equivalent martingale measure for pricing vulnerable European options. Explicit analytical pricing formulae for vulnerable European options are derived by risk-neutral pricing theory. For comparison, the other two cases are also considered separately. The first case considers all jump risks as unsystematic risks while the second one assumes all jumps risks to be systematic risks. Numerical examples for the valuation of vulnerable European options are provided to illustrate our results and indicate the influence of the market prices of jump risks on the valuation of vulnerable European options.
Mathematics Subject Classification ID: 91G20
zbMATH DE Number: 7026712
MaRDI profile type: Publication
full work available at URL: https://doi.org/10.1155/2018/8545841
OpenAlex ID: W2786675410
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description: scientific article; zbMATH DE number 7026712