Essays in Finance
Date Issued
2007
Date
2007
Author(s)
Chang, Lung-fu
DOI
en-US
Abstract
This thesis has contained two main parts. In the first section, this thesis follows the framework of Klein’s (1996) model to derive the analytical pricing formula for vulnerable American options based on the two-point Geske and Johnson method. The motivation for our extension of Klein’s (1996) model is that a number of financial derivatives in the over-the-counter market have American-style properties. We also perform the sensitivity analyses for vulnerable American options and demonstrate how the values of vulnerable American options vary with the correlation between the underlying asset of the option and the option writer’s asset. The second part of this thesis is to analyze values of catastrophe put options subject to interest rate risk when the underlying asset price is modeled through a Lévy process with finite activity. This thesis derives the explicit closed-form formulas for evaluating the value of a catastrophe put option and hedge parameters. The numerical examples exhibit how the financial risks and catastrophic risks affect the prices of catastrophe put options.
Subjects
美式選擇權
信用風險
隨機利率
巨災選擇權
選擇權定價
平賭過程
American options
Derivatives
Default
Credit risk
Multi-exercisable
Martingale
Catastrophe derivatives
Lé
vy process
Stochastic interest rate
Reinsurance
Option pricing
Time-changed Lé
Type
thesis
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