Pricing vulnerable European options with dynamic correlation between market risk and credit risk

Niu, Huawei; Xing, Yu; Zhao, Yonggan

doi:10.1016/j.jmse.2020.03.001

Cited by 11 publications

(4 citation statements)

References 36 publications

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“…Similar to the new method for DHFPRs, we can research other types of dual hesitant preference relation including linguistic DHFPRs 49 whose elements are multiplicative DHFEs. Furthermore, one can extend the results to DHFPRs with uncertain judgments, such as interval DHFPRs whose elements are interval DHFEs Besides the theoretical aspect, we can extend the application of the new results to some other management problems 50‐52 …”

Section: Discussionmentioning

confidence: 93%

A new method for deriving priority from dual hesitant fuzzy preference relations

Tang

Meng

Pedrycz

et al. 2021

Int J of Intelligent Sys

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Dual hesitant fuzzy elements (DHFEs) are suitable to express hesitant possible preferred and nonpreferred judgments of decision makers. Preference relation is an important tool in decision making that only needs the decision makers to compare a pair of objects at one time. This study focuses on decision making with dual hesitant fuzzy preference relations (DHFPRs). Considering the consistency, an additive consistency concept is defined. Meanwhile, the property of the new concept is studied. Using this consistency concept, a method for assessing the additive consistency of DHFPRs is offered. To extend the application of DHFPRs, a programming model to determine the missing DHFEs in incomplete DHFPRs is built, which have the highest additive consistency level for the known ones. Two equivalent methods to calculate the priority vector are offered. One method obtains the probabilistic dual hesitant fuzzy priority vector, and the other derives the intuitionistic fuzzy priority vector. Furthermore, a consensus index is defined to measure the consensus of individual opinions in group decision making (GDM), and an interactive method for increasing the consensus level is offered. On the basis of the additive consistency and consensus, an algorithm to GDM with DHFPRs is offered that can address inconsistent and incomplete cases. Finally, a practical example about evaluating color TV is provided to demonstrate the usefulness of the new procedure.

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Section: Discussionmentioning

confidence: 93%

A new method for deriving priority from dual hesitant fuzzy preference relations

Tang

Meng

Pedrycz

et al. 2021

Int J of Intelligent Sys

View full text Add to dashboard Cite

show abstract

“…Silantyev [9] conducts an in-depth analysis on the trade and quote data of the XBTUSD perpetual contract and demonstrates that the trade flow imbalance is better at explaining contemporaneous price changes than the aggregate order flow imbalance. Niu et al [10] studied the valuation of vulnerable European options incorporating the reduced-form approach, which models the credit default of the counterparty. Fosset et al [11] proposed an actionable calibration procedure for general Quadratic Hawkes models of order book events and found that the Zumbach kernel is a power-law of time, as are all other feedback kernels.…”

Section: Related Work Of Tradingmentioning

confidence: 99%

The Price Impact of Order Book Events from a Dimension of Time

Chi

Zhao

Huang

2021

Scientific Programming

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We propose a new linear model to explain the price move by Level-2 high-frequency data in Chinese mainland stock market. In Chinese stock market, the cancellation ratio is very low, and imbalanced order flow prevails most of the time in the trading periods. From time dimension viewpoint, we find the difference of efficiency of limit orders executed, respectively, in bid/ask limit order book, order execution imbalance (OEI), could improve the classic model of Cont et al. (2014) based on market microstructure of Chinese mainland stock market. In particular, when market’s liquidity is booming, our model’s explanatory power and R-squared increased sharply. And the correlations of OEI are very high that may be exploited to predict the price move in the next time window for doing high-frequency trading.

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“…Han et al [13] investigated vulnerable options pricing considering the market prices of common systematic jump risks under regimeswitching jump-diffusion models and derived explicit analytic pricing formulae for vulnerable options by risk-neutral pricing theory. Under the reduced-form framework, Niu et al [14] incorporated jump risks and dynamical correlation between the underlying asset and the counterparty asset in vulnerable options to present jump-diffusion pricing models with stochastic correction. More studies about vulnerable options pricing could be seen in Ma et al [15], Lee and Kim [16], Ma et al [17], Han [18], Niu and Wang [19], Yang et al [20], Pasricha and Goel [21], and the references therein.…”

Section: Introductionmentioning

confidence: 99%

Pricing Vulnerable Options in a Mixed Fractional Brownian Motion with Jumps

Cheng

2021

Discrete Dynamics in Nature and Society

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A new framework for pricing European vulnerable options is developed in the case where the underlying stock price and firm value follow the mixed fractional Brownian motion with jumps, respectively. This research uses the actuarial approach to study the pricing problem of European vulnerable options. An analytic closed-form pricing formula for vulnerable options with jumps is obtained. For the purpose of understanding the pricing model, some properties of this pricing model are discussed in the paper. Finally, we compare and analyze the pricing results of different pricing models and discuss the influences of basic parameters on the pricing results of our proposed model by using numerical simulations, and the corresponding economic analyses about these influences are given.

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Pricing vulnerable European options with dynamic correlation between market risk and credit risk

Cited by 11 publications

References 36 publications

A new method for deriving priority from dual hesitant fuzzy preference relations

A new method for deriving priority from dual hesitant fuzzy preference relations

The Price Impact of Order Book Events from a Dimension of Time

Pricing Vulnerable Options in a Mixed Fractional Brownian Motion with Jumps

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