We consider the valuation of European quanto call options in an incomplete market where the domestic and foreign forward interest rates are allowed to exhibit regime shifts under the Heath–Jarrow–Morton (HJM) framework, and the foreign price dynamics is exogenously driven by a regime...

In this paper, we modify the extendible debts model proposed in Longstaff (1990) to help relieve the moral hazard problem induced in the original model. In Longstaff¡¦s model, extending the maturity of the defaulted debts gives the borrower an incentive to default even if the borrower is...