Pricing formulae for constant proportion debt obligation notes: The Laplace transform technique

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Atıf İçin Kopyala

Cekic A. I., UĞUR Ö.

JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS, cilt.259, ss.362-370, 2014 (SCI-Expanded)

• Yayın Türü: Makale / Tam Makale
• Cilt numarası: 259
• Basım Tarihi: 2014
• Doi Numarası: 10.1016/j.cam.2013.06.006
• Dergi Adı: JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS
• Derginin Tarandığı İndeksler: Science Citation Index Expanded (SCI-EXPANDED), Scopus
• Sayfa Sayıları: ss.362-370
• Orta Doğu Teknik Üniversitesi Adresli: Evet

Özet

In this paper we derive closed form pricing formulae for the constant proportion debt obligation (CPDO) by using the Laplace transform technique. First, we present the pricing equation as a combination of a pricing problem (conditional expectation) and a static part that depends only on time. Then, we indicate that the pricing problem is in fact a pricing of a barrier option written on the shortfall. Hence, we derive explicit solutions of such barrier option problems when the shortfall follows either a diffusion or a double exponential jump diffusion process. Finally, we illustrate and discuss the results using numerical applications. (C) 2013 Elsevier B.V. All rights reserved.