Stock Options as Barrier Contingent Claims
AbstractThis paper contributes in two ways. First it extends the Geske (1979) compound option pricing model to the case where the underlying call is a down-and-out claim. Second it provides an internally consistent frame-work for valuing options on general corporate securities. Numerical results suggest that the detailed characteristics of the underlying capital structure (such as coupons, principal and maturities) may substantially influence the pricing of options.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 137.
Length: 38 pages
Date of creation: Nov 1996
Date of revision: 01 Feb 2002
Publication status: Published in Applied Mathematical Finance, 2003, pages 121-147.
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Compound barrier contingent claims; option pricing;
Other versions of this item:
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
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Research Program in Finance Working Papers
RPF-259, University of California at Berkeley.
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- Maria Carmen Badia Batlle & M. Mercedes Galisteo Rodriguez & M. Teresa Preixens Benedicto, 2006. "Un modelo de riesgo de credito basado en opciones compuestas con barrera. Aplicacion al mercado continuo espanol," Working Papers in Economics 156, Universitat de Barcelona. Espai de Recerca en Economia.
- Hanke, Michael, 2005. "Pricing options on leveraged equity with default risk and exponentially increasing, finite maturity debt," Journal of Economic Dynamics and Control, Elsevier, vol. 29(3), pages 389-421, March.
- Reindl, Johann & Stoughton, Neal & Zechner, Josef, 2013. "Market implied costs of bankruptcy," CFS Working Paper Series 2013/27, Center for Financial Studies (CFS).
- Marco Realdon, . "Valuation of Put Options on Leveraged Equity," Discussion Papers 03/19, Department of Economics, University of York.
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