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Article

Valuation of Exchange Option with Credit Risk in a Hybrid Model

School of Liberal Arts, Seoul National University of Science and Technology, Seoul 01811, Korea
Mathematics 2020, 8(11), 2091; https://doi.org/10.3390/math8112091
Received: 6 November 2020 / Revised: 19 November 2020 / Accepted: 21 November 2020 / Published: 23 November 2020
(This article belongs to the Special Issue Financial Mathematics II)
In this paper, the valuation of the exchange option with credit risk under a hybrid credit risk model is investigated. In order to build the hybrid model, we consider both the reduced-form model and the structural model. We adopt the probabilistic approach to derive the closed-form formula of an exchange option price with credit risk under the proposed model. Specifically, the change of measure technique is used repeatedly, and the pricing formula is provided as the standard normal cumulative distribution functions. View Full-Text
Keywords: exchange option; credit risk; hybrid model; option pricing exchange option; credit risk; hybrid model; option pricing
MDPI and ACS Style

Kim, G. Valuation of Exchange Option with Credit Risk in a Hybrid Model. Mathematics 2020, 8, 2091. https://doi.org/10.3390/math8112091

AMA Style

Kim G. Valuation of Exchange Option with Credit Risk in a Hybrid Model. Mathematics. 2020; 8(11):2091. https://doi.org/10.3390/math8112091

Chicago/Turabian Style

Kim, Geonwoo. 2020. "Valuation of Exchange Option with Credit Risk in a Hybrid Model" Mathematics 8, no. 11: 2091. https://doi.org/10.3390/math8112091

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