Tid: 13 november 2000 kl 1615-1700
Plats : Seminarierummet 3733, Institutionen för matematik, KTH, Lindstedts väg 25, plan 7. Karta!
Föredragshållare: Per Wirsén .
Titel: The Impact of Default Risk when Pricing Bermudan Bond Options Using the Jarrow-Turnbull Approach. (Examensarbete)
Sammanfattning: The objective of this thesis is to investigate the impact of default risk when pricing Bermudan bond options using the Jarrow-Turnbull approach. This approach incorporates credit ratings into the valuation of derivatives on corporate debt.
Bonds issued by three German banks with different credit ratings are used as the underlying. Bermudan option prices on these bonds are discussed and compared to Bermudan option prices on default-free bonds.
It is shown that ignoring the default risk of the underlying corporate bond leads to Bermudan bond options being mispriced by up to 5 - 6 % of the notional amount.
This study, together with Otto Francke's, ``The Impact of Default Risk when Pricing American Bond Options Using the Jarrow-Turnbull Approach'', was performed for Arthur Andersen as part of a project on the effect of default risk when pricing financial instruments.
Full text of master thesis.