Brigo, Damiano
[VerfasserIn]
;
Buescu, Cristin
[Sonstige Person, Familie und Körperschaft];
Rutkowski, Marek
[Sonstige Person, Familie und Körperschaft]
Funding, Repo and Credit Inclusion in Option Pricing via Dividends
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 18, 2016 erstellt
Beschreibung:
This paper specializes a number of earlier contributions to the theory of valuation of financial products in presence of credit risk, repurchase agreements and funding costs. Earlier works, including our own, pointed to the need of tools such as Backward Stochastic Differential Equations (BSDEs) or semi-linear Partial Differential Equations (PDEs), which in practice translate to ad-hoc numerical methods that are time-consuming and which render the full valuation and risk analysis difficult. We specialize here the valuation framework to benchmark derivatives and we show that, under a number of simplifying assumptions, the valuation paradigm can be recast as a Black-Scholes model with dividends. In turn, this allows for a detailed valuation analysis, stress testing and risk analysis via sensitivities. We refer to the full paper for a more complete mathematical treatment