Pricing Stock Options with State-Dependent Jump-to-Default
Other Title
狀態相依跳躍至違約模型下之股票選擇權定價
Journal
期貨與選擇權學刊
Journal Volume
10
Journal Issue
1
Pages
41
Date Issued
2017-04
Author(s)
Abstract
Under a general equilibrium framework, this study derives an analytic solution for the prices of options on individual stocks with bankruptcy risk. Different from traditional jump-to-default models, a firm's default probability herein is state-dependent and negatively related to its future stock prices. Using the market implied volatility of 60 firms during 1996-2015, the empirical results show that our model significantly outperforms the traditional model in terms of option pricing fits.
Type
journal article