ZeroCouponBond-class

ZeroCouponBond

A simple contract paying the <code>notional</code> amount at the <code>maturity</code>

Algorithms to price American and European
equity options, convertible bonds and a
variety of other financial derivatives. It uses an
extension of the usual Black-Scholes model in which
jump to default may occur at a probability specified
by a power-law link between stock price and hazard
rate as found in the paper by Takahashi, Kobayashi,
and Nakagawa (2001) <doi:10.3905/jfi.2001.319302>. We
use ideas and techniques from Andersen and
Buffum (2002) <doi:10.2139/ssrn.355308> and
Linetsky (2006) <doi:10.1111/j.1467-9965.2006.00271.x>.

Brian Boonstra

ragtop

Pricing Equity Derivatives with Extensions of Black-Scholes

ZeroCouponBond-class function

<dl class="dl-horizontal">
<dt><code>notional</code></dt><dd>The amount that will be paid at <code>maturity</code>, conditional on survival</dd></dl><dt><code>recovery_rate</code></dt><dd>The proportion of notional that would be expected to be paid to bond holders after bankruptcy court proceedings</dd><dt><code>discount_factor_fcn</code></dt><dd>A function specifying how cashflows should generally be discounted for this instrument</dd>

Fields

<dl class="dl-horizontal">
<dt><code>optionality_fcn(v, ...)</code></dt><dd>Return a version of v at time t corrected for any optionality conditions.</dd></dl><dt><code>recovery_fcn(v, S, t, ...)</code></dt><dd>Return recovery value, given non-default values v at time t. Subclasses may be more elaborate, this method simply returns 0.0.</dd>

ZeroCouponBond-class: A simple contract paying the `notional` amount at the `maturity`

Description

Arguments

Fields

Methods