Default probability of American lookback option in a mixed jump-diffusion model

Zhaoqiang Yang

Physica A: Statistical Mechanics and its Applications, 2020, vol. 540, issue C

Abstract: This paper considers the default probability of American lookback option in a mixed jump-diffusion model, where the underlying asset price has to cross two-sided predetermined strikes to activate the American lookback option. We study a default problem with the bankruptcy time being defined as the first passage time of the underlying asset price. By solving a system of coupled MJD-fBm, we obtain an explicit formula for the Laplace transform of the default time. Some numerical results are given for illustration.

Keywords: Mixed jump-diffusion model; MJD-fBm; American lookback option; The first passage time; Laplace transform; Explicit formula; Default probability (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437119318205
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:540:y:2020:i:c:s0378437119318205

DOI: 10.1016/j.physa.2019.123242

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().