Analytical valuation of vulnerable European and Asian options in intensity-based models
type: Item
instance of: scholarly article
title: Analytical valuation of vulnerable European and Asian options in intensity-based models
zbMATH Open document ID: 1461.91322
author: Xingchun Wang
published in: Journal of Computational and Applied Mathematics
publication date: 2021-04-23T00:00:00Z
review text: The author investigates European and Asian options with default risk in an intensity-based model. By breaking down the risk into idiosyncratic and systematic components, the underlying asset price is described by a two-factor stochastic volatility model and incorporate the correlation between the underlying asset and default risk. The main result provides pricing formulae of European and Asian options with default risk and illustrate the effects of default risk and systematic risk on option prices: prices of the options with default risk increase with systematic risk; and prices of the options with default risk drop as systematic risk increases when the total initial volatility of the underlying asset is kept unchanged.
Mathematics Subject Classification ID: 91G20
Mathematics Subject Classification ID: 91G30
Mathematics Subject Classification ID: 91G45
zbMATH DE Number: 7337465
zbMATH Keywords: vulnerable options
zbMATH Keywords: Asian options
zbMATH Keywords: intensity-based models
zbMATH Keywords: stochastic volatility
zbMATH Keywords: counterparty risk
reviewed by: George Stoica
MaRDI profile type: Publication
full work available at URL: j.cam.2021.113412
OpenAlex ID: W3125871005
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DOI: 10.1016/J.CAM.2021.113412
description: scientific article; zbMATH DE number 7337465