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RedSniper
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Joined: May 29th, 2003, 10:51 am

Vega of vulnerable option

December 26th, 2004, 8:41 pm

Hi,I'm trying to derive the partial derivative (vega) of vulnerable call and put options with respect to the volatility of the underlying asset. (e.g. Klein (1996) "Pricing Black - Scholes options with credit risk" Journal of Banking and Finance.) This is quite difficult because of the bivariate normal distribution in the pricing formula. Any suggestions or referrences welcome.RedSniper