Tian, Lihui; Wang, Guanying; Wang, Xingchun; Wang, Yongjin - In: Journal of Futures Markets 34 (2014) 10, pp. 957-979
This study extends the framework of Klein [Journal of Banking & Finance, 20, 1211–1229] to price vulnerable options. We provide a pricing model for vulnerable options which face not only default risk but also rare shocks encountered by the underlying asset and the assets of the counterparty....