Valuation of Game Options in Jump-Diffusion Model and with Applications to Convertible Bonds

Convertible bonds valuation in a jump diffusion setting with stochastic interest rates

Hedging of Options in Jump-Diffusion Markets with Correlated Assets

We consider the hedging problem in a jump-diffusion market with correlated assets. For this purpose, we employ the locally risk-minimizing approach and obtain the hedging portfolio as a solution of a multidimensional system of linear equations. ‎This system shows that in a continuous market, independence and correlation assumptions of assets lead to the same locally risk-minimizing portfolio. ‎...

Pricing convertible bonds based on a multi-stage compound option model

In this paper, we introduce the concept of multi-stage compound options to the valuation of convertible bonds. Rather than evaluating a nested high-dimensional integral that has arisen from the valuation of multistage compound options, we found that adopting the Finite Difference Method (FDM) to solve the BlackScholes equation for each stage actually resulted in a better numerical efficiency. B...

Closed formulas for the price and sensitivities of European options under a double exponential jump diffusion model

We derive closed formulas for the prices of European options andtheir sensitivities when the underlying asset follows a double-exponentialjump diffusion model, as considered by S. Kou in 2002. This author hasderived the option price by making use of double series where each termrequires the computation of a sequence of special functions, such thatthe implementation remains difficult for a large...

A Fourier transform-based method for convertible bonds in a jump diffusion setting with stochastic interest rates

The paper proposes a fast Fourier transform (FFT) pricing algorithm for convertible bonds in a framework which comprises firm value, evolving as an exponential jump diffusion, and correlated stochastic interest rates movements. This is a novel numerical technique for the convertible bonds literature and aims at fixing dimensionality and convergence limitations previously reported for popular gr...