{"title":"Pricing options on the maximum or the minimum of several assets with default risk","authors":"Jiayi Zhang , Ke Zhou","doi":"10.1016/j.najef.2024.102272","DOIUrl":null,"url":null,"abstract":"<div><p>This paper presents analytical solutions for options on the maximum or the minimum of several assets with counterparty default risk before maturity, including derivations of several specific Greeks. To derive the solutions, we provide the joint distribution of the minimum value of one Brownian motion and the terminal values of all Brownian motions for correlated multidimensional Brownian motion. We then conduct a numerical analysis to examine the effects of counterparty risk on option prices.</p></div>","PeriodicalId":47831,"journal":{"name":"North American Journal of Economics and Finance","volume":"75 ","pages":"Article 102272"},"PeriodicalIF":3.8000,"publicationDate":"2024-08-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"North American Journal of Economics and Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1062940824001979","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
This paper presents analytical solutions for options on the maximum or the minimum of several assets with counterparty default risk before maturity, including derivations of several specific Greeks. To derive the solutions, we provide the joint distribution of the minimum value of one Brownian motion and the terminal values of all Brownian motions for correlated multidimensional Brownian motion. We then conduct a numerical analysis to examine the effects of counterparty risk on option prices.
期刊介绍：
The focus of the North-American Journal of Economics and Finance is on the economics of integration of goods, services, financial markets, at both regional and global levels with the role of economic policy in that process playing an important role. Both theoretical and empirical papers are welcome. Empirical and policy-related papers that rely on data and the experiences of countries outside North America are also welcome. Papers should offer concrete lessons about the ongoing process of globalization, or policy implications about how governments, domestic or international institutions, can improve the coordination of their activities. Empirical analysis should be capable of replication. Authors of accepted papers will be encouraged to supply data and computer programs.
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