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Pricing Cancellation Product

Author

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  • Lee, David

Abstract

This article describes a valuation framework to build most common kinds of cancellation schedules and cancellation evens. The model can price generic cancellation derivatives accurately. It is very useful for derivatives trading and risk management.

Suggested Citation

  • Lee, David, 2022. "Pricing Cancellation Product," MPRA Paper 114147, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:114147
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    File URL: https://mpra.ub.uni-muenchen.de/114147/1/MPRA_paper_114147.pdf
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    References listed on IDEAS

    as
    1. Ammann, Manuel & Kind, Axel & Wilde, Christian, 2008. "Simulation-based pricing of convertible bonds," Journal of Empirical Finance, Elsevier, vol. 15(2), pages 310-331, March.
    2. Martzoukos, Spiros H. & Trigeorgis, Lenos, 2002. "Real (investment) options with multiple sources of rare events," European Journal of Operational Research, Elsevier, vol. 136(3), pages 696-706, February.
    3. Alan Brace & Dariusz G¸atarek & Marek Musiela, 1997. "The Market Model of Interest Rate Dynamics," Mathematical Finance, Wiley Blackwell, vol. 7(2), pages 127-155, April.
    4. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    cancellable structured note; derivatives valuation;

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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