In this paper, we consider an improved model of pricing vulnerable options with credit risk. We assume that the vulnerable European options not only face default risk, but also face the rare shocks of the underlying a...In this paper, we consider an improved model of pricing vulnerable options with credit risk. We assume that the vulnerable European options not only face default risk, but also face the rare shocks of the underlying assets and the counterparty assets. The dynamics of two correlated assets are modeled as a class of jump diffusion processes. Furthermore, we assume that the dynamic of the corporate liability is a geometric Brownian motion that is related to the underlying asset and the counterparty asset. Under this new framework,we give an explicit pricing formula of the vulnerable European options.展开更多
This study investigates a firm's financing,investment,and payout policies through a rational expectation equilibrium based on which managers and outside investors have heterogeneous prior beliefs.The proposed mode...This study investigates a firm's financing,investment,and payout policies through a rational expectation equilibrium based on which managers and outside investors have heterogeneous prior beliefs.The proposed model demonstrates that managers tend to overinvest(underinvest)if the extent of heterogeneousness is above(below)a threshold,which differs under distinct circumstances.Moreover,a price bubble is positively related to overinvestment,and the model shows that a firm's optimal financing choices and payout policies vary with the assumption of heterogeneous beliefs.展开更多
基金supported by the National Natural Science Foundation of China(No.11471051 and No.11871010)supported by the National Social Science Foundation of China(No.16ZDA033)
文摘In this paper, we consider an improved model of pricing vulnerable options with credit risk. We assume that the vulnerable European options not only face default risk, but also face the rare shocks of the underlying assets and the counterparty assets. The dynamics of two correlated assets are modeled as a class of jump diffusion processes. Furthermore, we assume that the dynamic of the corporate liability is a geometric Brownian motion that is related to the underlying asset and the counterparty asset. Under this new framework,we give an explicit pricing formula of the vulnerable European options.
基金This work is supported by the National Natural Science Foundation of China(Nos.71733004 and 71871062)Beijing Natural Science Foundation(No.9174033)Humanities and Social Science Research Project of Ministry of Education of China(Nos.16YJA630078,17YJC630108).
文摘This study investigates a firm's financing,investment,and payout policies through a rational expectation equilibrium based on which managers and outside investors have heterogeneous prior beliefs.The proposed model demonstrates that managers tend to overinvest(underinvest)if the extent of heterogeneousness is above(below)a threshold,which differs under distinct circumstances.Moreover,a price bubble is positively related to overinvestment,and the model shows that a firm's optimal financing choices and payout policies vary with the assumption of heterogeneous beliefs.
