Download or read book Closed-Form Interpolation-Based Formulas for European Call Options Written on Defaultable Assets written by Greg Orosi and published by . This book was released on 2015 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we derive closed-form, interpolation-based expressions for European call options written on defaultable assets. Our results are based on the work of Henderson at al. (2007), who derive formulas that incorporate standard static no-arbitrage restrictions, and Orosi (2014) who establishes an improved lower bound for European call options written on defaultable assets. Although, in general, the models are incapable of representing the entire call option surface because of the low number of parameters, we demonstrate their applicability to extract important quantities from quoted options. In particular, the probability of default, the size of a default barrier, and the recovery rate can be inferred from the model.