Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
9726022 | International Review of Financial Analysis | 2005 | 17 Pages |
Abstract
This paper provides simple closed-form pricing models for floating-rate notes and vulnerable options under the counterparty risk framework of [Jarrow, R., Yu, F., 2001. Counterparty risk and the pricing of default risk. Journal of Finance 56, 1765-1799]. After deriving closed-form pricing models for them, this paper illustrates the impact of the default intensity of counterparty on the prices of floating-rate notes and vulnerable options. Numerical examples show that the default risk of counterparty is an important factor of the value of floating-rate notes and vulnerable options.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Jangkoo Kang, Hwa-Sung Kim,