PRICING VULNERABLE AMERICAN PUT OPTIONS UNDER JUMP-DIFFUSION PROCESSES

摘要

This paper evaluates vulnerable American put options under jump-diffusion assumptions on the underlying asset and the assets of the counterparty. Sudden shocks on the asset prices are described as a compound Poisson process. Analytical pricing formulae of vulnerable European put options and vulnerable twice-exercisable European put options are derived. Employing the two-point Geske and Johnson method, we derive an approximate analytical pricing formula of vulnerable American put options under jump-diffusions. Numerical simulations are performed for investigating the impacts of jumps and default risk on option prices.