Bond and Option Prices under Skew Vasicek Model with Transaction Cost
| Autor: | Hossein Samimi, Ali Reza Najafi |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2021 |
| Předmět: |
Exponential distribution
Article Subject General Mathematics media_common.quotation_subject 02 engineering and technology Mathematics::Probability 0502 economics and business QA1-939 0202 electrical engineering electronic engineering information engineering Econometrics media_common Mathematics Vasicek model 050208 finance Bond 05 social sciences General Engineering Skew Engineering (General). Civil engineering (General) Interest rate Valuation of options Portfolio 020201 artificial intelligence & image processing TA1-2040 Martingale (probability theory) |
| Zdroj: | Mathematical Problems in Engineering, Vol 2021 (2021) |
| ISSN: | 1024-123X |
| DOI: | 10.1155/2021/9920240 |
| Popis: | This paper studies the European option pricing on the zero-coupon bond in which the Skew Vasicek model uses to predict the interest rate amount. To do this, we apply the skew Brownian motion as the random part of the model and show that results of the model predictions are better than other types of the model. Besides, we obtain an analytical formula for pricing the zero-coupon bond and find the European option price by constructing a portfolio that contains the option and a share of the bond. Since the skew Brownian motion is not a martingale, thus we add transaction costs to the portfolio, where the time between trades follows the exponential distribution. Finally, some numerical results are presented to show the efficiency of the proposed model. |
| Databáze: | OpenAIRE |
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