On the pricing of vulnerable Parisian options

IF 7.4 2区经济学 Q1 BUSINESS, FINANCE

Finance Research Letters Pub Date : 2024-08-22 DOI:10.1016/j.frl.2024.105995

引用次数: 0

Abstract

Parisian options, serving as substitutes for barrier options, are frequently embedded in complex financial derivatives. Despite the considerable mathematical challenges in pricing, their significant applications in finance and insurance have generated extensive studies in the literature. However, the impact of counterparty risk has not been taken into account so far. To address this gap, we develop a closed-form pricing framework for vulnerable Parisian options. Utilizing the Laplace transform and measure-change technique, we derive closed-form pricing formulas of Parisian options incorporating counterparty credit risk. Finally, we conduct numerical analyses to verify our pricing formulas’ accuracy and efficiency.

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关于弱势巴黎期权的定价

巴黎期权是障碍期权的替代品，经常被嵌入复杂的金融衍生品中。尽管在定价方面存在相当大的数学挑战，但其在金融和保险领域的重要应用已引起了文献的广泛研究。然而，迄今为止，交易对手风险的影响尚未被考虑在内。为了弥补这一不足，我们为脆弱的巴黎期权开发了一个封闭式定价框架。利用拉普拉斯变换和度量变化技术，我们推导出了包含交易对手信用风险的巴黎期权闭式定价公式。最后，我们进行了数值分析，以验证我们的定价公式的准确性和效率。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Finance Research Letters BUSINESS, FINANCE-

CiteScore

11.10

自引率

14.40%

发文量

863

期刊介绍： Finance Research Letters welcomes submissions across all areas of finance, aiming for rapid publication of significant new findings. The journal particularly encourages papers that provide insight into the replicability of established results, examine the cross-national applicability of previous findings, challenge existing methodologies, or demonstrate methodological contingencies. Papers are invited in the following areas: Actuarial studies Alternative investments Asset Pricing Bankruptcy and liquidation Banks and other Depository Institutions Behavioral and experimental finance Bibliometric and Scientometric studies of finance Capital budgeting and corporate investment Capital markets and accounting Capital structure and payout policy Commodities Contagion, crises and interdependence Corporate governance Credit and fixed income markets and instruments Derivatives Emerging markets Energy Finance and Energy Markets Financial Econometrics Financial History Financial intermediation and money markets Financial markets and marketplaces Financial Mathematics and Econophysics Financial Regulation and Law Forecasting Frontier market studies International Finance Market efficiency, event studies Mergers, acquisitions and the market for corporate control Micro Finance Institutions Microstructure Non-bank Financial Institutions Personal Finance Portfolio choice and investing Real estate finance and investing Risk SME, Family and Entrepreneurial Finance

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