The Pricing Of Exchange Option With Counterparty Risk

Credit risk or default risk is the risk that an agent fails to fulfill contractual obli-gations. With the growth of over-the-counter derivatives markets , there has been acorresponding growth in risk of counterparty default. Counterparty risk is the risk thatthe default of a firm's counterparty might a?ect its own default probability.we talk about the pricing of power exchange option with counter-party risk in thisthesis.The wholes thesis consists of three chapters.In chapter one, we discuss the history and the development of the options, then wediscuss a kinds of pricing model of credit risk.In chapter two, we mainly concern with the Pricing of power option When pricereturns have hyperbolic distribution, then we discuss the pricing of power exchange optionson stocks driven by Ornstein-Uhleneck process.In chapter three, we mainly consider the pricing of defaultable power exchange optionwith counter-party, and the case of time-tag contagion.