MC Simulation of a First-Passage Time Problem in Equity Market Driven by Levy Processes
نویسنده
چکیده
The Equity Default Swaps (EDS) has rapidly grabbed an increasing market share and hence drawn lots of attention recently. This newly invented financial instrument is designed to insure that if the underlying stock price drops to a specified low boundary during certain time horizon, the contract seller compensates the buyer by a designated amount of money. For instance, IBM stock is now traded at $100 today. Party A for some hypothetical reasons does not want the price drop to $5, so party A calls party B to purchase an EDS contract, under which B pays A $1,000,000 if the stock price sinks below $5. Party B in return demands a price for selling the contract.
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تاریخ انتشار 2004