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Pricing vulnerable options in a hybrid credit risk model driven by Heston-Nandi GARCH processes
Gechun Liang / Xingchun Wang
credit risk / derivativesResource overview

Pricing vulnerable options in a hybrid credit risk model driven by Heston-Nandi GARCH processes

Paper2020

by Gechun Liang, Xingchun Wang

Tags
credit riskderivativesgarchoption pricing

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Suggested foundations for volatility models and surfaces and credit and counterparty risk. Specialist prerequisites vary by paper.

Before you read

  1. Stochastic Processes, Brownian Motion and Itô's Lemma

    Follow diffusion-based models and their assumptions.

  2. ARCH and GARCH

    Separate conditional volatility from observed returns.

  3. Credit Instruments, PD/LGD/EAD, and Rating Migration

    Separate default probability, loss severity and exposure.

  4. Conditional Expectation

    Read conditional default and exposure quantities.

Go further

  1. Stochastic Volatility and the Heston Model

    Study a correlated stochastic-variance model.

  2. Reading the Implied Vol Surface — Moneyness, Term Structure, and Quoting Conventions

    Interpret prices across strikes and expiries.

  3. Threshold Models and the Gaussian Copula for Portfolio Default

    Study dependence between defaults.

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Lesson links open public previews. Access to full lessons depends on the topic and your membership.

Explore Advanced Derivatives and Exotic Options Explore Counterparty Credit Risk and CVA

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