Title
The Down-and-Out-Call Option Model of Default Risk: An Application of Genetic Algorithms
Abstract
This paper compares results obtained from two different structural option based models of credit risk derived from Merton (1974). The traditional Merton model is computed using calculus based algorithms and used as a benchmark. The Down-and-Out Call Equity (DOC) option model is solved using genetic algorithms (GA). Results for the DOC option model using GA are compared to a previous study which utilized a hybrid of branch-and-bound algorithm and bisection search method to solve the DOC option model. The paper finds GA yields better precision and convergence rates than the combinatorial methods based algorithm
Document Type
Article
Publication Date
2013
Recommended Citation
Gupta, Manu, and Puneet Prakash. "The Down-and-Out-Call Option Model of Default Risk: An Application of Genetic Algorithms." International Journal of Engineering and Industries 4, no. 1 (2013): 10.
Journal Title
International Journal of Engineering and Industries
