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Paper / 2021SMQ / 40361736301656
Solution Representations of Solving Problems for the Black-Scholes equations and Application to the Pricing Options on Bond with Credit Risk
Hyong-Chol O / Tae-Song Choe / Tae-Song Kim
credit risk / derivativesResource overview

Solution Representations of Solving Problems for the Black-Scholes equations and Application to the Pricing Options on Bond with Credit Risk

Paper2021

by Hyong-Chol O, Tae-Song Choe, Tae-Song Kim

Tags
credit riskderivativesoption pricingpartial differential equations

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Understand this paper

Suggested foundations for options and derivatives pricing and credit and counterparty risk. Specialist prerequisites vary by paper.

Before you read

  1. The Binomial Model

    Build replication and risk-neutral probabilities in a tractable model.

  2. Market Model and Risk-Neutral Valuation

    Distinguish pricing probabilities from physical forecasts.

  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. The Black-Scholes PDE, Formula and Implied Volatility

    Connect the pricing equation, closed-form value and implied volatility.

  2. Threshold Models and the Gaussian Copula for Portfolio Default

    Study dependence between defaults.

  3. CVA and DVA

    Connect exposure and counterparty losses to valuation adjustments.

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

Explore Derivatives Pricing and Computational Finance Explore Counterparty Credit Risk and CVA

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