A closed-form solution for pricing European-style options under the Heston model with credit and liquidity risks

被引：0
|
作者：
He, Xin-Jiang [1 ,2 ]
Huang, Shou-De [3 ]
Lin, Sha [4 ,5 ]
机构：
[1] Zhejiang Univ Technol, Sch Econ, Hangzhou, Peoples R China
[2] Zhejiang Univ Technol, Inst Ind Syst Modernizat, Hangzhou, Peoples R China
[3] Anshun Univ, Sch Math & Comp Sci, Anshun, Guizhou, Peoples R China
[4] Zhejiang Gongshang Univ, Sch Finance, Hangzhou, Peoples R China
[5] Zhejiang Gongshang Univ, Sch Tailong Finance, Hangzhou 310018, Peoples R China
来源：
COMMUNICATIONS IN NONLINEAR SCIENCE AND NUMERICAL SIMULATION | 2025年 / 143卷
基金：
中国国家自然科学基金;
关键词：
Credit risks; Vulnerable options; Stochastic volatility; Stochastic liquidity; Closed-form formulation; VULNERABLE OPTIONS; STOCHASTIC VOLATILITY;
D O I：
10.1016/j.cnsns.2025.108595
中图分类号：
O29 [应用数学];
学科分类号：
070104 ;
摘要：
Credit risks are one type of hazardous financial risks, which results in the necessity of considering vulnerable options. Two involved assets, corresponding to underlying and option seller's ones, both follow Heston stochastic volatility with different parameters, and their prices are discounted via a stochastic factor relying on stochastic market-wide liquidity. We then develop a general formula after the establishment of a risk-neutral measure, and it can be computed analytically since we are able to derive a closed-form joint characteristic function. Liquidity and volatility risks are shown through numerical experiments to significantly impact vulnerable option prices.
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页数：12
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