American options and callable bonds under stochastic interest rates and endogenous bankruptcy
type: Item
instance of: scholarly article
title: American options and callable bonds under stochastic interest rates and endogenous bankruptcy
zbMATH Open document ID: 1235.91166
author: João P. Nunes
published in: Review of Derivatives Research
publication date: 2012-01-26T00:00:00Z
review text: This paper introduces a new method for pricing American equity options under a general multifactor diffusion model. The author shows that the efficiency of the proposed method depends on both a viable valuation method and the transition density of the state variables in the model. In the case of the Gauss-Markov stochastic interest rate environment, the proposed valuation method is shown to offer a much better accuracy-efficiency trade-off than some existing approximation methods. The author has also applied the proposed method to price callable corporate bonds in the context of an endogenous bankruptcy structural model.
reviewed by: Tak Kuen Siu
Mathematics Subject Classification ID: 91G20
zbMATH DE Number: 6000242
zbMATH Keywords: American options
zbMATH Keywords: optimal stopping time
zbMATH Keywords: convolutions
zbMATH Keywords: stochastic interest rates
zbMATH Keywords: callable defaultable bonds
MaRDI profile type: Publication
full work available at URL: s11147-010-9058-x
OpenAlex ID: W2146254904
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DOI: 10.1007/S11147-010-9058-X
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description: scientific article; zbMATH DE number 6000242