Defaultable perpetual Russian option Under a last passage time model

2022/11/25 by Zhuoshu Wu, Libo Li, Wu, Zhuoshu +1 · 2 citations
Economics, Econometrics and Finance · #Capital Investment and Risk Analysis #FOS: Mathematics #Probability (math.PR) #Stochastic processes and financial applications

paper · pdf · doi:10.48550/arxiv.2211.13917

openalex publication_date 2022/11/25 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

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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• Pricing American Options Time-Capped by a Drawdown Event
• Pricing American options time-capped by a drawdown event in a Lévy market

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