Closed-Form Solution for Defaultable Bond Options under a Two-Factor Gaussian Model for Risky Rates Modeling
Vincenzo Russo, Rosella Giacometti and Frank J. Fabozzi
The Journal of Derivatives Winter 2020, jod.2020.1.104; DOI: https://doi.org/10.3905/jod.2020.1.104
Vincenzo Russo
is head of unit for Group Risk Management at Assicurazioni Generali S.p.A., in Milan, Italy
Rosella Giacometti
is a professor at the Department of Management, Economics and Quantitative Methods at the University of Bergamo in Bergamo, Italy
Frank J. Fabozzi
is a professor of finance at the EDHEC Business School in Nice, France.
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In this issue
The Journal of Derivatives
Vol. 29, Issue 3
Spring 2022
Closed-Form Solution for Defaultable Bond Options under a Two-Factor Gaussian Model for Risky Rates Modeling
Vincenzo Russo, Rosella Giacometti, Frank J. Fabozzi
The Journal of Derivatives Apr 2020, jod.2020.1.104; DOI: 10.3905/jod.2020.1.104
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- Article
- Abstract
- THE FRAMEWORK FOR MODELING RISKY RATES
- A TWO-FACTOR GAUSSIAN MODEL FOR THE RISKY SHORT-RATES
- PRICING AND STOCHASTIC DYNAMIC FOR DEFAULTABLE BONDS UNDER THE TWO-FACTOR GAUSSIAN MODEL
- DEFAULTABLE COUPON-BEARING BONDS
- PRICING OPTIONS ON DEFAULTABLE BONDS
- OPTIONS ON DEFAULTABLE ZERO-COUPON BONDS
- OPTIONS ON DEFAULTABLE COUPON-BEARING BONDS
- MODEL’S CALIBRATION UNDER A MARKET-CONSISTENT APPROACH
- EMPIRICAL ANALYSIS
- CONCLUSION
- ADDITIONAL READING
- ENDNOTES
- REFERENCES
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