Analytical pricing of defaultable discrete coupon bonds in unified two-factor model of structural and reduced form models

Hyong-Chol, O; Kim, Dong-Hyok; Pak, Chol-Hyok

doi:10.1016/j.jmaa.2014.02.026

Cited by 4 publications

(1 citation statement)

References 12 publications

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“…Pricing default securities under the hybrid model are now a popular area of research. One is referred to Cathcart and El-Jahel [8], Realdon [9], Hyong-Chol O [10], Ballestra et al [11]. In this paper, we will price a default bond with dynamic barrier under the hybrid model framework.…”

Section: Introductionmentioning

confidence: 99%

Pricing default bonds with dynamic default barrier under the hybrid model

Zhou¹,

Pan²

2016

ams

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In this paper, we present a new pricing model for default bonds with dynamic default barrier under the hybrid model framework. Furthermore, closed-form pricing formulae for default bonds are obtained by using variable transforms and PDE approach, which expand the relevant literature's results. Moreover, several numerical examples are provided to illustrate the effect of the main parameters on the credit spread of a default bond.

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Section: Introductionmentioning

confidence: 99%

Pricing default bonds with dynamic default barrier under the hybrid model

Zhou¹,

Pan²

2016

ams

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General properties of solutions to inhomogeneous Black–Scholes equations with discontinuous maturity payoffs

Hyong-Chol¹,

Jo²,

Kim³

2016

Journal of Differential Equations

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Abstract:We provide representations of solutions to terminal value problems of inhomogeneous Black-Scholes equations and studied such general properties as min-max estimates, gradient estimates, monotonicity and convexity of the solutions with respect to the stock price variable, which are important for financial security pricing. In particular, we focus on finding representation of the gradient (with respect to the stock price variable) of solutions to the terminal value problems with discontinuous terminal payoffs or inhomogeneous terms. Such terminal value problems are often encountered in pricing problems of compound-like options such as Bermudan options or defaultable bonds with discrete default barrier, default intensity and endogenous default recovery. Our results are applied in pricing defaultable discrete coupon bonds.

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The Price of Granularity and Fractional Finance

Tapiero

Jumarie

2015

SSRN Journal

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Analytical pricing of defaultable discrete coupon bonds in unified two-factor model of structural and reduced form models

Cited by 4 publications

References 12 publications

Pricing default bonds with dynamic default barrier under the hybrid model

Pricing default bonds with dynamic default barrier under the hybrid model

General properties of solutions to inhomogeneous Black–Scholes equations with discontinuous maturity payoffs

The Price of Granularity and Fractional Finance

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