Pricing Options with Credit Risk in Markovian Regime-Switching Markets
نویسندگان
چکیده
This paper investigates the valuation of European option with credit risk in a reduced formmodel when the stock price is driven by the so-called Markov-modulated jump-diffusion process, in which the arrival rate of rare events and the volatility rate of stock are controlled by a continuous-time Markov chain. We also assume that the interest rate and the default intensity follow the Vasicek models whose parameters are governed by the sameMarkov chain.We study the pricing of European option and present numerical illustrations.
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عنوان ژورنال:
- J. Applied Mathematics
دوره 2013 شماره
صفحات -
تاریخ انتشار 2013