scholarly journals Convergence of discrete time option pricing models under stochastic interest rates

2000 ◽  
Vol 4 (1) ◽  
pp. 81-93 ◽  
Author(s):  
J.-P. Lesne ◽  
J.-L. Prigent ◽  
O. Scaillet
Keyword(s):  
Option Pricing ◽  
Interest Rates ◽  
Discrete Time ◽  
Pricing Models ◽  
Stochastic Interest Rates ◽  
Stochastic Interest

scholarly journals Pricing Spread Options with Stochastic Interest Rates

2014 ◽  
Vol 2014 ◽  
pp. 1-11 ◽  
Author(s):  
Yunguo Jin ◽  
Shouming Zhong
Keyword(s):  
Option Pricing ◽  
Interest Rates ◽  
Stock Returns ◽  
Grid Method ◽  
Pricing Models ◽  
Stochastic Interest Rates ◽  
Spread Options ◽  
Asset Pricing Models ◽  
Stochastic Interest ◽  
Spread Option

Although spread options have been extensively studied in the literature, few papers deal with the problem of pricing spread options with stochastic interest rates. This study presents three novel spread option pricing models that permit the interest rates to be random. The paper not only presents a good approach to formulate spread option pricing models with stochastic interest rates but also offers a new test bed to understand the dynamics of option pricing with interest rates in a variety of asset pricing models. We discuss the merits of the models and techniques presented by us in some asset pricing models. Finally, we use regular grid method to the calculation of the formula when underlying stock returns are continuous and a mixture of both the regular grid method and a Monte Carlo method to the one when underlying stock returns are discontinuous, and sensitivity analyses are presented.

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