Valuation of double trigger catastrophe options with counterparty risk

I. Ming Jiang, Sheng Yung Yang, Yu Hong Liu, Alan T. Wang

Research output: Contribution to journalArticlepeer-review

15 Citations (Scopus)


This study presents a novel catastrophe option pricing model that considers counterparty risk. Asset prices are modeled through a jump-diffusion process which is correlated to counterparty loss process and collateral assets. Because of the long term of catastrophe options, this study also examines the model in the stochastic interest rate environment. The numerical results indicate that counterparty risk significantly affects the value of options. Recently, numerous serious financial events have demonstrated the importance of counterparty risk when valuing financial products.

Original languageEnglish
Pages (from-to)226-242
Number of pages17
JournalNorth American Journal of Economics and Finance
Publication statusPublished - 2013 Aug

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


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