Research Article
Year 2016,
Volume: 45 Issue: 1, 195 - 206, 01.02.2016
Abstract
In this paper we propose the transition probability of business cycle
for the pricing of options with credit risk. In order to describe business cycles of markets, the regime switching model is considered. We
provide the probability density functions of the occupation time of the
high volatility regime via Laplace transforms. Using these functions we
derive the analytic valuation formulae for options with correlated credit
risk and business cycle. We also illustrate the important properties of
options with numerical graphs.
for the pricing of options with credit risk. In order to describe business cycles of markets, the regime switching model is considered. We
provide the probability density functions of the occupation time of the
high volatility regime via Laplace transforms. Using these functions we
derive the analytic valuation formulae for options with correlated credit
risk and business cycle. We also illustrate the important properties of
options with numerical graphs.
References
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There are 1 citations in total.
Details
| Primary Language | English |
|---|---|
| Subjects | Statistics |
| Journal Section | Statistics |
| Authors | |
| Publication Date | February 1, 2016 |
| Published in Issue | Year 2016 Volume: 45 Issue: 1 |