Pricing American Options With Stochastic Interest Rates
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A Pricing Model For American Options With Stochastic Interest Rates
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Author : Ton Vorst
language : en
Publisher:
Release Date : 2008
A Pricing Model For American Options With Stochastic Interest Rates written by Ton Vorst and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
In this paper we develop a new method to value American stock options with stochastic interest rates. We construct a binomial tree for the stock price divided by the price of the zero coupon bond that matures at the maturity date of the option. In fact, we construct a tree for the so-called forward risk adjusted measure. In each node of the tree the quotient of the stock price and bond price is constant and there are combinations of stock and bond prices for which immediate exercise is optimal and other combinations for which this is not the case. We derive for each node in the tree an analytic expression for the expected immediate exercise premium conditional on this quotient of stock and bond prices. This immediate exercise premium is added to the value that is derived from the familiar backward procedure. Both European and American option prices depend on the correlation between the interest rate process and the stock price process. It is interesting to see that with increasing correlation between the interest rate process and the stock price process, and hence a decreasing correlation between bond and stock prices, the values of European options increase, while the values of the early exercise premium decrease. For American options this might result in a non-monotonic relation between the correlation coefficient and the option price. Furthermore, there is evidence that the early exercise premium due to stochastic interest rates is much larger than established before by other researchers. Finally, we also consider the influence of the shape of the initial term structure.
A Pricing Model For American Options With Stochastic Interest Rates
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Author : Albert Jan Menkveld
language : en
Publisher:
Release Date : 1998
A Pricing Model For American Options With Stochastic Interest Rates written by Albert Jan Menkveld and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with categories.
Pricing American Options With Stochastic Interest Rates
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Author : Kaushik I. Amin
language : en
Publisher:
Release Date : 1992
Pricing American Options With Stochastic Interest Rates written by Kaushik I. Amin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1992 with International finance categories.
Pricing American Options With Stochastic Interest Rates
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Author : Kaushik Ishwar Amin
language : en
Publisher:
Release Date : 1992
Pricing American Options With Stochastic Interest Rates written by Kaushik Ishwar Amin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1992 with International finance categories.
Pricing American Options Under Stochastic Volatility And Stochastic Interest Rates
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Author : Jannick B. G. Schreiner
language : en
Publisher:
Release Date : 2012
Pricing American Options Under Stochastic Volatility And Stochastic Interest Rates written by Jannick B. G. Schreiner and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
Pricing American Options Under Stochastic Volatility And Stochastic Interest Rates
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Author : Alexey Medvedev
language : en
Publisher:
Release Date : 2007
Pricing American Options Under Stochastic Volatility And Stochastic Interest Rates written by Alexey Medvedev and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
Discrete Time Valuation Of American Options With Stochastic Interest Rates
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Author : Kaushik I. Amin
language : en
Publisher:
Release Date : 2012
Discrete Time Valuation Of American Options With Stochastic Interest Rates written by Kaushik I. Amin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
We develop an arbitrage-free discrete time model to price American-style claims for which domestic term structurerisk, foreign term structure risk and currency risk are important. This model combines a discrete version of the Heath, Jarrow, Morton (1992) term structure model with the binomial model of Cox, Ross, and Rubinstein (1979). It converges (weakly) to the continuous time models in Amin and Jarrow (1991, 1992). The general model is quot;path dependentquot; and can be implemented with arbitrary volatility functions to value claims with maturity up to five years. The model is illustrated with applications to long-dated American currency warrants and a cross-rate swap from the quanto class.
Pricing American Call Options With Dividend And Stochastic Interest Rates
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Author : Shu-Ing Liu
language : en
Publisher:
Release Date : 2009
Pricing American Call Options With Dividend And Stochastic Interest Rates written by Shu-Ing Liu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
This article presents a closed form solution for pricing American stock call options with one known dividend under the Ho-Lee stochastic interest rate assumptions. Both the closed-form pricing formula and delta hedge ratio formula for the discussed American stock call options are derived. The correlation between the underlying stock price process and the discount factor process is suitably established. Numerical analyses demonstrate that there are some crucial parameters, the correlation coefficient between the stock price process and the discount factor process, and the amount of dividend, that have an impact on the option price and the delta hedge ratio. These results provide researchers and participants with some pricing and hedging applications in the real financial market.
The Valuation Of American Options With Stochastic Interest Rates
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Author : Teng Suan Ho
language : en
Publisher:
Release Date : 1996
The Valuation Of American Options With Stochastic Interest Rates written by Teng Suan Ho and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1996 with Interest rate futures categories.
American Spread Option Pricing With Stochastic Interest Rates
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Author : An Jiang
language : en
Publisher:
Release Date : 2016
American Spread Option Pricing With Stochastic Interest Rates written by An Jiang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
In financial markets, spread option is a derivative security with two underlying assets and the payoff of the spread option depends on the difference of these assets. We consider American style spread option which allows the owners to exercise it at any time before the maturity. The complexity of pricing American spread option is that the boundary of the corresponding partial differential equation which determines the option price is unknown and the model for the underlying assets is two-dimensional.