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Article: Pricing Vulnerable Options Under a Markov-modulated Jump-Diffusion Model with Fire Sales
Title | Pricing Vulnerable Options Under a Markov-modulated Jump-Diffusion Model with Fire Sales |
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Authors | |
Keywords | Vulnerable Option Regime-Switching Change Of Numéraire Distressed Selling Multinomial Approach |
Issue Date | 2019 |
Publisher | American Institute of Mathematical Sciences. The Journal's web site is located at https://aimsciences.org/journals/home.jsp?journalID=5 |
Citation | Journal of Industrial and Management Optimization, 2019, v. 15 n. 1, p. 293-318 How to Cite? |
Abstract | In this paper, we consider the valuation of vulnerable options under a Markov-modulated jump-diffusion model, where the option writer's asset value is subject to price pressure from other financial institutions due to distressed selling. A change of numéraire technique, proposed by Geman et al. [14], is employed to obtain a semi-analytical pricing formula for an vulnerable European option in the presence of regime switching effect. The method is numerically implemented using the multinomial approach in Costabile et al. [6]. We study the impacts of distressed selling and regime switching on the European option prices via numerical experiments. |
Persistent Identifier | http://hdl.handle.net/10722/266095 |
ISSN | 2023 Impact Factor: 1.2 2023 SCImago Journal Rankings: 0.364 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Yang, Q | - |
dc.contributor.author | Ching, WK | - |
dc.contributor.author | He, W | - |
dc.contributor.author | Siu, T | - |
dc.date.accessioned | 2018-12-17T02:16:46Z | - |
dc.date.available | 2018-12-17T02:16:46Z | - |
dc.date.issued | 2019 | - |
dc.identifier.citation | Journal of Industrial and Management Optimization, 2019, v. 15 n. 1, p. 293-318 | - |
dc.identifier.issn | 1547-5816 | - |
dc.identifier.uri | http://hdl.handle.net/10722/266095 | - |
dc.description.abstract | In this paper, we consider the valuation of vulnerable options under a Markov-modulated jump-diffusion model, where the option writer's asset value is subject to price pressure from other financial institutions due to distressed selling. A change of numéraire technique, proposed by Geman et al. [14], is employed to obtain a semi-analytical pricing formula for an vulnerable European option in the presence of regime switching effect. The method is numerically implemented using the multinomial approach in Costabile et al. [6]. We study the impacts of distressed selling and regime switching on the European option prices via numerical experiments. | - |
dc.language | eng | - |
dc.publisher | American Institute of Mathematical Sciences. The Journal's web site is located at https://aimsciences.org/journals/home.jsp?journalID=5 | - |
dc.relation.ispartof | Journal of Industrial and Management Optimization | - |
dc.rights | Journal of Industrial and Management Optimization. Copyright © American Institute of Mathematical Sciences. | - |
dc.rights | This is a pre-copy-editing, author-produced PDF of an article accepted for publication in [insert journal title] following peer review. The definitive publisher-authenticated version [insert complete citation information here] is available online at: xxxxxxx [insert URL that the author will receive upon publication here]. | - |
dc.subject | Vulnerable Option | - |
dc.subject | Regime-Switching | - |
dc.subject | Change Of Numéraire | - |
dc.subject | Distressed Selling | - |
dc.subject | Multinomial Approach | - |
dc.title | Pricing Vulnerable Options Under a Markov-modulated Jump-Diffusion Model with Fire Sales | - |
dc.type | Article | - |
dc.identifier.email | Ching, WK: wching@hku.hk | - |
dc.identifier.authority | Ching, WK=rp00679 | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.3934/jimo.2018044 | - |
dc.identifier.hkuros | 296265 | - |
dc.identifier.volume | 15 | - |
dc.identifier.issue | 1 | - |
dc.identifier.spage | 293 | - |
dc.identifier.epage | 318 | - |
dc.identifier.isi | WOS:000450650500016 | - |
dc.publisher.place | United States | - |
dc.identifier.issnl | 1547-5816 | - |