Pricing Cash-or-Nothing Binary Options with Two Underlying Assets Under Default Risk

抄録

This study extended the theory of binary option pricing under default risk by extending the single underlying asset model to two underlying assets and a bilateral strike price model, while considering the correlation between different assets, focusing on the pricing analysis of cash-or-nothing binary options. The study derives a closed form options pricing formula using the Martingale method and proves that the formula is applicable to the pricing formula of binary option call and put options under default risk. Finally, numerical examples are used to analyze the characteristics and hedging value changes of binary options with two underlying assets under default risk. In addition, this study also highlights that under default risk, hedging with multiple underlying options is more difficult than general option hedging operations. This formula helps issuers to further understand the important basis for effective hedging in the issuance of multiple underlying commodities.