Exotic Options With Non-Constant Interest Rate & Local Volatility

2019 ◽  
Author(s):  
Joel Bindi ◽  
Hong Chan Jeon ◽  
Ankit Jain
Keyword(s):  
Interest Rate ◽  
Exotic Options ◽  
Local Volatility ◽  
Constant Interest Rate ◽  
Constant Interest

scholarly journals A Note on Credit Insurance

2006 ◽  
Vol 36 (02) ◽  
pp. 347-360 ◽  
Author(s):  
Johannes Leitner
Keyword(s):  
Interest Rate ◽  
Recovery Rate ◽  
Credit Default Swap ◽  
Credit Default ◽  
Premium Calculation ◽  
Linear Ode ◽  
Default Swap ◽  
Stochastic Recovery Rate ◽  
Constant Interest Rate ◽  
Constant Interest

In a simple stationary setting with constant interest rate, we derive pricing formulas for defaultable bonds with stochastic recovery rate using a replication argument. Replication is done by using an insurance contract (i.e. a kind of credit default swap), the price of which is determined by a dynamic premium calculation principle. We consider two cases, a linear one, where pricing amounts to solving an inhomogeneous linear ODE, and a super-linear case where a Riccati ODE has to be solved.

scholarly journals MARTINGALE METHOD FOR RUIN PROBABILITY IN AN AUTOREGRESSIVE MODEL WITH CONSTANT INTEREST RATE

2003 ◽  
Vol 17 (2) ◽  
pp. 183-198 ◽  
Author(s):  
Hailiang Yang ◽  
Lihong Zhang
Keyword(s):  
Interest Rate ◽  
Autoregressive Model ◽  
Ruin Probability ◽  
Risk Model ◽  
Martingale Method ◽  
Insurance Risk ◽  
Infinite Time ◽  
Probability Of Ruin ◽  
Constant Interest Rate ◽  
Constant Interest

In this article, we consider a discrete-time insurance risk model. An autoregressive model is used to model both the claim process and the premium process. The probability of ruin is examined in a model with a constant interest rate. Both exponential and nonexponential upper bounds are obtained for the ruin probability of an infinite time horizon.

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