Mellin Transform Method for European Option Pricing with Hull-White Stochastic Interest Rate

作者：Ji‐Hun Yoon · 发表于：Journal of Applied Mathematics · 年份：2014 · DOI：10.1155/2014/759562 · 被引用次数：27 · 研究领域：Stochastic processes and financial applications、Simulation Techniques and Applications、Financial Risk and Volatility Modeling

Even though interest rates fluctuate randomly in the marketplace, many option-pricing models do not fully consider their stochastic nature owing to their generally limited impact on option prices. However, stochastic dynamics in stochastic interest rates may have a significant impact on option prices as we take account of issues of maturity, hedging, or stochastic volatility. In this paper, we derive a closed form solution for European options in Black-Scholes model with stochastic interest rate using Mellin transform techniques.