Pricing collateralised options in the presence of counterparty credit risk: An extension of the Heston–Nandi model
-
Published:2022
Issue:1
Volume:56
Page:37-51
-
ISSN:0038-271X
-
Container-title:South African Statistical Journal
-
language:
-
Short-container-title:SASJ
Author:
Venter Pierre J.,Maré Eben
Abstract
In this paper, a closed-formexpression for a collateralised European option in the presence of counterparty credit risk and stochastic volatility is derived. The model is applied to Standard and Poor’s 500 index options. The model prices obtained are consistent with expectations.
Publisher
Stellenbosch University
Subject
Statistics, Probability and Uncertainty,Statistics and Probability