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Pricing Vulnerable Options in Continuous Time Models

Under path dependent consideration, we discuss vulnerable option pricing problem. Two pricing
models are proposed: Model(1) use stepwise regression and Monte Carlo simulation, and Model(2) is based on
multi-level regression method. Since the option price was approximated by quadratic surface at each time point
in Model(1), large mean square errors are induced. Therefore, we further propose a stepwise subset regression
method to improve Model(1) approach. At present, this proposed method can compute the option price accurately
for no credit risk options. For Model(2), we utilize a multi-level regression method to price vulnerable
options, and simulation results show that the method can also obtain accurate option prices.

Identiferoai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0706105-162110
Date06 July 2005
CreatorsTsai, Ru-mei
ContributorsFu-Chuen Chang, Mong-na Lo Huang, Mei-hui Guo
PublisherNSYSU
Source SetsNSYSU Electronic Thesis and Dissertation Archive
LanguageCholon
Detected LanguageEnglish
Typetext
Formatapplication/pdf
Sourcehttp://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0706105-162110
Rightswithheld, Copyright information available at source archive

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