Defaultable perpetual Russian option Under a last passage time model

Zhuoshu Wu; Libo Li

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arXiv · 2211.13917

Defaultable perpetual Russian option Under a last passage time model

Zhuoshu Wu·Libo Li

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Abstract

In this article we provide a valuation formula for a defaultable perpetual Russian option in the Black-Scholes market where the default time is modelled as the last passage time of the running maximum of the stock price. In this setting, default occurs when the stock price fails to exceed its historical maximum, leading to a non-stopping time that depends on the path of the underlying asset.

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Zhuoshu Wu, Libo Li. 2022-11-25. Defaultable perpetual Russian option Under a last passage time model. https://arxiv.org/abs/2211.13917

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