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Title: A Closed-Form Approximation for Valuing European Basket Warrants under Credit Risk and Interest Rate Risk
Authors: 許永明
Shiu, Yung-Ming;Chou, Pai-Lung;Sheu, Jen-Wen
Contributors: 風管系
Keywords: Derivatives pricing;Derivatives securities;Stochastic interest rates;Credit risk;G1;G13
Date: 2013.08
Issue Date: 2014-11-13 14:49:58 (UTC+8)
Abstract: Over the past few years, many financial institutions have actively traded basket warrants in the over-the-counter market. Prior research has proposed an approach to valuing single-stock options subject to credit. However, this approach cannot be applied directly to the case of basket warrants. Using the martingale method, we propose a closed-form approximation for valuing European basket warrants using a continuous-time model, with credit risk and interest rate risk considered simultaneously. Finally, several numerical examples are utilized to demonstrate the characteristics of basket warrants under credit risk.
Relation: Quantitative Finance, 13(8), 1211-1223
Data Type: article
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Appears in Collections:[風險管理與保險學系 ] 期刊論文

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