Pricing Basket Spread Options With Default Risk Under GARCH‐Jump Models
研究了在GARCH跳跃过程描述资产动态、并纳入违约风险的模型下，如何为篮子价差期权定价，推导了近似定价公式，并用穆迪1970-2015年违约率数据估计参数，通过蒙特卡洛模拟验证了定价精度。
ABSTRACT In this article, we consider basket spread options with default risk in a pricing model, where GARCH‐jump processes are employed to describe the dynamics of all the underlying assets, and default risk is incorporated in a reduced form model. After successfully deriving the approximate pricing formula, we utilize the average cumulative default rates provided by Moody's spanning from 1970 to 2015 to estimate the parameters in the default intensity. Finally, we illustrate the impact of jump risk and default risk on basket spread options after checking the accuracy and efficiency of the approximate prices via Monte Carlo simulation methods.