A Simplified Approach to the Pricing of Vulnerable Options with Two Underlying Assets in an Intensity-Based Model
Abstract
:1. Introduction
2. The Model
3. The Valuation of Vulnerable Options with Two Underlying Assets
3.1. Vulnerable Exchange Option
3.2. Vulnerable Foreign Equity Option
4. Numerical Experiments
4.1. Monte Carlo Simulation
4.2. Numerical Examples
5. Concluding Remarks
Funding
Data Availability Statement
Conflicts of Interest
References
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Vulnerable Exchange Option | |||||
---|---|---|---|---|---|
Price | Monte Carlo | R-Err | |||
100 | 60 | 0.25 | 27.763 | 28.185 | 1.52 |
0.5 | 31.842 | 31.496 | 1.08 | ||
0.75 | 35.921 | 35.908 | 3.53 | ||
80 | 0.25 | 13.716 | 13.738 | 1.67 | |
0.5 | 15.811 | 15.801 | 6.01 | ||
0.75 | 17.905 | 17.974 | 3.89 | ||
100 | 0.25 | 1.519 | 1.545 | 1.71 | |
0.5 | 1.811 | 1.839 | 1.54 | ||
0.75 | 2.102 | 2.117 | 7.37 | ||
Av. run time (s) | 0.031 | 18.1211 |
Vulnerable Foreign Equity Option | |||||
---|---|---|---|---|---|
Price | Monte Carlo | R-Err | |||
100 | 60 | 0.25 | 37.211 | 37.067 | 3.87 |
0.5 | 42.120 | 42.454 | 7.93 | ||
0.75 | 47.019 | 46.960 | 1.24 | ||
80 | 0.25 | 24.480 | 24.418 | 2.53 | |
0.5 | 27.665 | 27.677 | 4.39 | ||
0.75 | 30.849 | 30.850 | 1.929 | ||
100 | 0.25 | 14.332 | 14.344 | 8.50 | |
0.5 | 16.179 | 16.159 | 1.21 | ||
0.75 | 18.028 | 17.984 | 2.41 | ||
Av. run time (s) | 0.030 | 18.2574 |
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Kim, G. A Simplified Approach to the Pricing of Vulnerable Options with Two Underlying Assets in an Intensity-Based Model. Axioms 2023, 12, 1105. https://0-doi-org.brum.beds.ac.uk/10.3390/axioms12121105
Kim G. A Simplified Approach to the Pricing of Vulnerable Options with Two Underlying Assets in an Intensity-Based Model. Axioms. 2023; 12(12):1105. https://0-doi-org.brum.beds.ac.uk/10.3390/axioms12121105
Chicago/Turabian StyleKim, Geonwoo. 2023. "A Simplified Approach to the Pricing of Vulnerable Options with Two Underlying Assets in an Intensity-Based Model" Axioms 12, no. 12: 1105. https://0-doi-org.brum.beds.ac.uk/10.3390/axioms12121105