scholarly journals The European style arithmetic Asian option pricing with stochastic interest rate based on Black Scholes model

2017 ◽  
Author(s):  
Yuyun Guna Winarti ◽  
Lienda Noviyanti ◽  
Gatot R. Setyanto
Keyword(s):  
Interest Rate ◽  
Option Pricing ◽  
Stochastic Interest Rate ◽  
Asian Option ◽  
Black Scholes Model ◽  
Stochastic Interest ◽  
Black Scholes

PRICING OPTIONS UNDER STOCHASTIC INTEREST RATE AND THE FRASCA–FARINA PROCESS: A SIMPLE, EXPLICIT FORMULA

2021 ◽  
pp. 2150003
Author(s):  
MOAWIA ALGHALITH
Keyword(s):  
Interest Rate ◽  
Simple Formula ◽  
Stochastic Interest Rate ◽  
European Options ◽  
Pricing Options ◽  
Black Scholes Model ◽  
Stochastic Interest ◽  
Black Scholes ◽  
Practical Complexity ◽  
Theoretical Limitation

Assuming a stochastic interest rate, we introduce a simple formula for pricing European options. In doing so, we provide a complete closed-form formula that does not require any numerical/computational methods. Furthermore, the model and formula are far simpler than the previous models/formulas. Our formula is as simple as the classical Black–Scholes pricing formula. Moreover, it removes the theoretical limitation of the original Black–Scholes model without any added practical complexity.

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