As a kind of weak-path dependent options, barrier options are an important kind of exotic options. Because the pricing formula for pricing barrier options with discrete observations cannot avoid computing a high dimen...As a kind of weak-path dependent options, barrier options are an important kind of exotic options. Because the pricing formula for pricing barrier options with discrete observations cannot avoid computing a high dimensional integral, numerical calculation is time-consuming. In the current studies, some scholars just obtained theoretical derivation, or gave some simulation calculations. Others impose underlying assets on some strong assumptions, for example, a lot of calculations are based on the Black-Scholes model. This thesis considers Merton jump diffusion model as the basic model to derive the pricing formula of discrete double barrier option;numerical calculation method is used to approximate the continuous convolution by calculating discrete convolution. Then we compare the results of theoretical calculation with simulation results by Monte Carlo method, to verify their efficiency and accuracy. By comparing the results of degeneration constant parameter model with the results of previous models we verified the calculation method is correct indirectly. Compared with the Monte Carlo simulation method, the numerical results are stable. Even if we assume the simulation results are accurate, the time consumed by the numerical method to achieve the same accuracy is much less than the Monte Carlo simulation method.展开更多
Default Probabilities quantitatively measures the credit risk that a borrower will be unable or unwilling to repay its debt. An accurate model to estimate, as a function of time, these default probabilities is of cruc...Default Probabilities quantitatively measures the credit risk that a borrower will be unable or unwilling to repay its debt. An accurate model to estimate, as a function of time, these default probabilities is of crucial importance in the credit derivatives market. In this work, we adapt Merton’s [1] original works on credit risk, consumption and portfolio rules to model an individual wealth scenario, and apply it to compute this individual default probabilities. Using our model, we also compute the time depending individual default intensities, recovery rates, hazard rate and risk premiums. Hence, as a straight-forward application, our model can be used as novel way to measure the credit risk of individuals.展开更多
We have shown that cornerstone articles considering effects of corporate debt on the firm value and constituting the basis of the trade-off theory of capital structure are wrong.Their main mistake is in ignoring the b...We have shown that cornerstone articles considering effects of corporate debt on the firm value and constituting the basis of the trade-off theory of capital structure are wrong.Their main mistake is in ignoring the business securing expenses(BSEs).In the framework of the extended Merton model(EMM),we consider the cumulative effect of debt and corporate taxes on the firm value and its survival,in other words,we revisit Modigliani-Miller Proposition 3(MMP3).We show that(1)debt affects the firm value and its survival,(2)this effect is negative,diminishing the firm value and its chances to survive,(3)the pressure increases as the debt grows provoking the firm’s default,(4)the main factors depressing the levered firm are its debt payments added to the BSEs of the identical unlevered firm and the length of debt maturity,(5)corporate taxes cause development of positive skewness in the asset distribution,but do not affect the location of this distribution in the asset axis.The presented model helps estimate the consequences of choosing this or that level of debt in the presence of corporate taxes and can make a useful instrument for practicing financial managers.展开更多
文摘As a kind of weak-path dependent options, barrier options are an important kind of exotic options. Because the pricing formula for pricing barrier options with discrete observations cannot avoid computing a high dimensional integral, numerical calculation is time-consuming. In the current studies, some scholars just obtained theoretical derivation, or gave some simulation calculations. Others impose underlying assets on some strong assumptions, for example, a lot of calculations are based on the Black-Scholes model. This thesis considers Merton jump diffusion model as the basic model to derive the pricing formula of discrete double barrier option;numerical calculation method is used to approximate the continuous convolution by calculating discrete convolution. Then we compare the results of theoretical calculation with simulation results by Monte Carlo method, to verify their efficiency and accuracy. By comparing the results of degeneration constant parameter model with the results of previous models we verified the calculation method is correct indirectly. Compared with the Monte Carlo simulation method, the numerical results are stable. Even if we assume the simulation results are accurate, the time consumed by the numerical method to achieve the same accuracy is much less than the Monte Carlo simulation method.
文摘Default Probabilities quantitatively measures the credit risk that a borrower will be unable or unwilling to repay its debt. An accurate model to estimate, as a function of time, these default probabilities is of crucial importance in the credit derivatives market. In this work, we adapt Merton’s [1] original works on credit risk, consumption and portfolio rules to model an individual wealth scenario, and apply it to compute this individual default probabilities. Using our model, we also compute the time depending individual default intensities, recovery rates, hazard rate and risk premiums. Hence, as a straight-forward application, our model can be used as novel way to measure the credit risk of individuals.
文摘We have shown that cornerstone articles considering effects of corporate debt on the firm value and constituting the basis of the trade-off theory of capital structure are wrong.Their main mistake is in ignoring the business securing expenses(BSEs).In the framework of the extended Merton model(EMM),we consider the cumulative effect of debt and corporate taxes on the firm value and its survival,in other words,we revisit Modigliani-Miller Proposition 3(MMP3).We show that(1)debt affects the firm value and its survival,(2)this effect is negative,diminishing the firm value and its chances to survive,(3)the pressure increases as the debt grows provoking the firm’s default,(4)the main factors depressing the levered firm are its debt payments added to the BSEs of the identical unlevered firm and the length of debt maturity,(5)corporate taxes cause development of positive skewness in the asset distribution,but do not affect the location of this distribution in the asset axis.The presented model helps estimate the consequences of choosing this or that level of debt in the presence of corporate taxes and can make a useful instrument for practicing financial managers.
