Pricing Warrant Bonds with Credit Risk under a Jump Diffusion Process
This article investigates the pricing of the warrant bonds with default risk under a jump diffusion process. We assume that the stock price follows a jump diffusion model while the interest rate and the default intensity have the feature of mean reversion. By the risk neutral pricing theorem, we obt...
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| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Wiley
2018-01-01
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| Series: | Discrete Dynamics in Nature and Society |
| Online Access: | http://dx.doi.org/10.1155/2018/4601395 |
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| _version_ | 1832565829300912128 |
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| author | Xiaonan Su Wei Wang Wensheng Wang |
| author_facet | Xiaonan Su Wei Wang Wensheng Wang |
| author_sort | Xiaonan Su |
| collection | DOAJ |
| description | This article investigates the pricing of the warrant bonds with default risk under a jump diffusion process. We assume that the stock price follows a jump diffusion model while the interest rate and the default intensity have the feature of mean reversion. By the risk neutral pricing theorem, we obtain an explicit pricing formula of the warrant bond. Furthermore, numerical analysis is provided to illustrate the sensitivities of the proposed pricing model. |
| format | Article |
| id | doaj-art-fd12270cb2f445c8ad9ee39d353c40b0 |
| institution | Kabale University |
| issn | 1026-0226 1607-887X |
| language | English |
| publishDate | 2018-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Discrete Dynamics in Nature and Society |
| spelling | doaj-art-fd12270cb2f445c8ad9ee39d353c40b02025-02-03T01:06:41ZengWileyDiscrete Dynamics in Nature and Society1026-02261607-887X2018-01-01201810.1155/2018/46013954601395Pricing Warrant Bonds with Credit Risk under a Jump Diffusion ProcessXiaonan Su0Wei Wang1Wensheng Wang2School of Statistics and Mathematics, Nanjing Audit University, Nanjing 200815, ChinaDepartment of Financial Engineering, Ningbo University, Ningbo 315211, ChinaSchool of Economics, Hangzhou Dianzi University, Hangzhou 310018, ChinaThis article investigates the pricing of the warrant bonds with default risk under a jump diffusion process. We assume that the stock price follows a jump diffusion model while the interest rate and the default intensity have the feature of mean reversion. By the risk neutral pricing theorem, we obtain an explicit pricing formula of the warrant bond. Furthermore, numerical analysis is provided to illustrate the sensitivities of the proposed pricing model.http://dx.doi.org/10.1155/2018/4601395 |
| spellingShingle | Xiaonan Su Wei Wang Wensheng Wang Pricing Warrant Bonds with Credit Risk under a Jump Diffusion Process Discrete Dynamics in Nature and Society |
| title | Pricing Warrant Bonds with Credit Risk under a Jump Diffusion Process |
| title_full | Pricing Warrant Bonds with Credit Risk under a Jump Diffusion Process |
| title_fullStr | Pricing Warrant Bonds with Credit Risk under a Jump Diffusion Process |
| title_full_unstemmed | Pricing Warrant Bonds with Credit Risk under a Jump Diffusion Process |
| title_short | Pricing Warrant Bonds with Credit Risk under a Jump Diffusion Process |
| title_sort | pricing warrant bonds with credit risk under a jump diffusion process |
| url | http://dx.doi.org/10.1155/2018/4601395 |
| work_keys_str_mv | AT xiaonansu pricingwarrantbondswithcreditriskunderajumpdiffusionprocess AT weiwang pricingwarrantbondswithcreditriskunderajumpdiffusionprocess AT wenshengwang pricingwarrantbondswithcreditriskunderajumpdiffusionprocess |