Option Pricing in the Presence of Operational Risk

Subject Areas : Financial Mathematics

Alireza  Bahiraie ¹ (Department of Mathematics, Faculty of Mathematics, Statistics and Computer Sciences, Semnan University, Semnan 35131-19111, Iran)
Mohammad  Alipour ² (Department of Mathematics, Faculty of Mathematics, Statistics and Computer Sciences, Semnan University, Semnan 35131-19111, Iran)
Rehan  Sadiq ³ (School of Engineering, University of British Columbia (Okanagan), 3333 University Way, Kelowna, Canada)

Received: 2020-08-23 Accepted : 2020-08-23 Published : 2020-10-01

Keywords:

References:

[1] Acharya, V., Pedersen, L., Asset pricing with liquidity risk, Journal of Financial Economics,
2005, 77, P. 375-410, Doi:10.1016/j.jfineco.2004.06.007

 

[2] Bahiraie, A. and Alipour, M., Jump OpVaR with operational risk, International Journal of Computing Science and Mathematics, 2020, 12)3(, P. 213-225, Doi:10.1504/IJCSM.2019.10025236

 

[3] Bahiraie, A., Azhar, A.K.M. and Ibrahim, A. A new dynamic geometric approach for empirical analysis of financial ratios and bankruptcy, Journal of Industrial and Management Optimization, 2011, 7)4(, P. 947–965, Doi:10.3934/jimo.2011.7.947

 

[4] Bahiraie, A., Abbasi, B., Omidi, F., Hamzah, N.A. and Yaakub, A.H. Continuous time portfolio optimization, International Journal of Nonlinear Analysis and Applications, 2015, 6(2), P. 103–112.

 Doi:10.22075/IJNAA.2015.258

 

[5] Black, F., Scholes, M., The Pricing of Options and Corporate Liabilities, Journal of Political
Economy, 1973, 81, P. 637-654, Doi:10.1086/260062

 

[6] Chavez-Demoulin, V., Embrechts, P., Neslehova, J., Quantitative models for operational
risk:Extremes, dependence and aggregation, Journal of Banking & Finance, 2006, 30(206), P.
2635-2658, Doi:10.1016/j.jbankfin.2005.11.008

 

[7] Chorafas, D., Operational Risk Control with Basel II: Basic Principles and Capital Requirements,
Butterworth-Heinemann, Oxford, 2004, Doi:10.1007/978-3-642-15923-7

 

[8] Cont, R., Tankov, P., Financial Modelling with Jump Processes, second printing. Chapman and
Hall/CRC Press, London, 2004, Doi:10.1201/9780203485217

 

[9] Eshaghi, M., Askari, G., Hyper-Rational Choice and Economic Behaviour, Advances in Mathematical Finance and Applications, 2018, 3(3), P. 69-76, Doi:10.22034/AMFA.2018.544950

[10] Elandt, R., The folded normal distribution: two methods of estimating parameters from moments, Journal of Technimetrics, 1961, 3, P. 551-562, Doi:10.2307/ 1266561

 

[11] Fenga, S. P., Hung, M. W., Wang, Y. H, Option pricing with stochastic liquidity risk: Theory
and evidence, Journal of Financial Markets, 2014, 18, P. 77-95.

 

[12] Hanson, F. B., Westman, J. J, Jump-Diffusion Stock Return Models in Finance: Stochastic
Process Density with Uniform-Jump Amplitude, working paper, University of Illinois at Chicago,
2002, Doi:10.1016/j.finmar.2013.05.002

 

[13] Hull,J., White, A., The impact of default risk on the prices of options and other derivative
securities, Journal of Banking &Finance, 1995, 19, P. 299-322, Doi:10.1016/0378-4266(94)00050

 

[14] Izadikhah, M., Improving the Banks Shareholder Long Term Values by Using Data Envelopment Analysis Model, Advances in Mathematical Finance and Applications, 2018, 3(2), P.27-41.

Doi: 10.22034/amfa.2018.540829

 

[15] Jackson, P., Maude, D. J., Perraudin, W., Bank capital and value at risk, Journal of Derivatives, 1997, 4, P. 73-90, Doi:10.3905/jod.1997.407972

 

[16] Klein. P., Pricing Black-Scholes options with correlated credit risk, Journal of Banking & Finance, 1996, 20, P.1211-1129, Doi:10.1016/0378-4266(95)00052

 

[17] Merton, R. C., Option pricing when underlying stock returns are discontinuous, Journal of Financial Economics. 1976, 3, P. 125-144, Doi:10.1016/0304-405 (76)90022-2

 

[18] Mitra, S., Operational risk of option hedging, Journal of Economic Modelling, 2013, 33,
P. 194-203, Doi:10.1016/j.econmod.2013.04.031

 

[19] Su, X., Wang, W., Pricing options with credit risk in a reduced form model, Journal of the
Korean Statistical Society, 2012, 41, P. 437-444, Doi: 10.1016/j.jkss.2012.01.006

 

[20] Suleyman, B., Andrea M. B., A Theory of Operational Risk, SSRN, Society for Economic Dynamics, 2016, Meeting Papers, 352, Doi:10.2139/ssrn.2737178