This paper presents a simple reduce-form approach to pricing credit derivatives. The definition of default is purely based on the market value of a risky bond and its potential recovery value. A risky bond is treated as a riskless bond with an embedded short position on a barrier option. The risky bond market implicitly prices this barrier option. The default implied volatility (DIV) curve for ...

Hedging down-and-out puts (and up-and-out calls), where the maximum payoff is reached just before a barrier hit that would render claim worthless afterwards, challenging. All hedging methods potentially lead to large errors when underlying already close and hedge portfolio can only be adjusted in discrete time intervals. In this paper, we analyze situation, especially case of overnight trading ...

some persian proverbs concern a problem and how to encounter it. the present paper seeks to examine such proverbs. findings indicate that in the analyzed proverbs, force image schemas have three options. in the first option, a problem is depicted as a barrier that cannot be removed. in these proverbs, there is no recommendation or solution for solving the problem. in the second option, the prob...

European Range Accrual Option pricing and deviation Formula has been deduced through observing the foundational asset probabilistic distribution characteristics with help of Ito’s lemma, relaxing boundary assumption to infinity zero respectively, classical Black-Scholes option formula worked out. This paper subsequently articulates numerical value simulated computation algorithm using...