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Azéma martingales for Bessel and CIR processes and the pricing of Parisian zero-coupon bonds

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  • Dassios, Angelos
  • Lim, Jia Wei
  • Qu, Yan

Abstract

In this paper, we study the excursions of Bessel and CIR processes with dimensions 0

Suggested Citation

  • Dassios, Angelos & Lim, Jia Wei & Qu, Yan, 2020. "Azéma martingales for Bessel and CIR processes and the pricing of Parisian zero-coupon bonds," LSE Research Online Documents on Economics 101765, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:101765
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    File URL: http://eprints.lse.ac.uk/101765/
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    References listed on IDEAS

    as
    1. Freddy Delsaen, 1993. "Consols In the Cir Model," Mathematical Finance, Wiley Blackwell, vol. 3(2), pages 125-134, April.
    2. Chen, Ren-Raw & Scott, Louis O, 1992. "Pricing Interest Rate Options in a Two-Factor Cox-Ingersoll-Ross Model of the Term Structure," The Review of Financial Studies, Society for Financial Studies, vol. 5(4), pages 613-636.
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    4. Robert A. Jarrow & David Lando & Fan Yu, 2008. "Default Risk And Diversification: Theory And Empirical Implications," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 19, pages 455-480, World Scientific Publishing Co. Pte. Ltd..
    5. Heston, Steven L, 1993. "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," The Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 327-343.
    6. Damiano Brigo & Aurélien Alfonsi, 2005. "Credit default swap calibration and derivatives pricing with the SSRD stochastic intensity model," Finance and Stochastics, Springer, vol. 9(1), pages 29-42, January.
    7. Peter Carr & Vadim Linetsky, 2006. "A jump to default extended CEV model: an application of Bessel processes," Finance and Stochastics, Springer, vol. 10(3), pages 303-330, September.
    8. Dassios, Angelos & Lim, Jia Wei, 2013. "Parisian option pricing: a recursive solution for the density of the Parisian stopping time," LSE Research Online Documents on Economics 58985, London School of Economics and Political Science, LSE Library.
    9. Angelos Dassios & Shanle Wu, 2010. "Perturbed Brownian motion and its application to Parisian option pricing," Finance and Stochastics, Springer, vol. 14(3), pages 473-494, September.
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    More about this item

    Keywords

    Azéma martingale; Parisian stopping time; Cox-Ingersoll-Ross process; Bessel process; Monte Carlo simulation;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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