Pricing vulnerable European options under a two-sided jump model via Laplace transforms

Pricing vulnerable options under a jump-diffusion model with fast mean-reverting stochastic volatility

“…There are two popular jump-diffusion models, Merton's model [18] with normally distributed jump size and double-exponential jump-diffusion model proposed by Kou [14]. Most of the existing literature on vulnerable options subject to jumpdiffusion processes assume that the volatility is constant and both the underlying asset and the counter-party's asset follow jump-diffusion processes with specific jump size distributions, see, for instance Xu et al [27], Tian et al [25], Niu et al [20,21]. This paper investigates the vulnerable options pricing problem under a jump-diffusion model with fast mean-reverting stochastic volatility.…”