Download or read book Improved Lower Bounds of Call Options Written on Defaultable Assets written by Greg Orosi and published by . This book was released on 2015 with total page 6 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides an improved model-independent lower bound of European call options written on defaultable assets. Based on static arbitrage arguments, improved lower bounds are established, which also depend on the probability of option implied default. The results are also extended to dividend paying stocks. Moreover, our findings imply that it is never optimal to exercise certain American call options. Finally, we discuss the implications of our results for constructing an arbitrage-free volatility surface and extracting risk-neutral densities from option prices.