Please use this identifier to cite or link to this item:
http://hdl.handle.net/10071/14001
Author(s): | Ruas, J. P. Dias, J. C. Nunes, J. |
Date: | 2013 |
Title: | Pricing and static hedging of American-style options under the jump to default extended CEV model |
Volume: | 37 |
Number: | 11 |
Pages: | 4059 - 4072 |
ISSN: | 0378-4266 |
DOI (Digital Object Identifier): | 10.1016/j.jbankfin.2013.07.019 |
Keywords: | American options Static hedging CEV model JDCEV model Early exercise boundary |
Abstract: | This paper prices (and hedges) American-style options through the static hedge approach (SHP) proposed by Chung and Shih (2009) and extends the literature in two directions. First, the SHP approach is generalized to the jump to default extended CEV UDCEV) model of Carr and Linetsky (2006), and plain-vanilla American-style options on defaultable equity are priced. The robustness and efficiency of the proposed pricing solutions are compared with the optimal stopping approach offered by Nunes (2009), under both the JDCEV framework and the nested constant elasticity of variance (CEV) model of Cox (1975), using different elasticity parameter values. Second, the early exercise boundary near expiration is derived under the JDCEV model. |
Peerreviewed: | yes |
Access type: | Open Access |
Appears in Collections: | BRU-RI - Artigos em revistas científicas internacionais com arbitragem científica |
Files in This Item:
File | Description | Size | Format | |
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Pricing and Static Hedging of American-style Options under the Jump to Default Extended CEV Model.pdf | Pré-print | 365,72 kB | Adobe PDF | View/Open |
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