European option pricing when the interest rate is stochastic

1997 ◽  
Author(s):  
Shu Ngai Yeung
Keyword(s):  
Interest Rate ◽  
Option Pricing ◽  
European Option ◽  
European Option Pricing ◽  
The Interest Rate

scholarly journals Option Pricing Formulas in a New Uncertain Mean-Reverting Stock Model with Floating Interest Rate

2020 ◽  
Vol 2020 ◽  
pp. 1-8
Author(s):  
Zhaopeng Liu
Keyword(s):  
Interest Rate ◽  
Option Pricing ◽  
Financial Market ◽  
American Option Pricing ◽  
European Option ◽  
Numerical Examples ◽  
Mathematical Properties ◽  
Proposed Model ◽  
Stock Model ◽  
The Interest Rate

Options play a very important role in the financial market, and option pricing has become one of the focus issues discussed by the scholars. This paper proposes a new uncertain mean-reverting stock model with floating interest rate, where the interest rate is assumed to be the uncertain Cox-Ingersoll-Ross (CIR) model. The European option and American option pricing formulas are derived via the α -path method. In addition, some mathematical properties of the uncertain option pricing formulas are discussed. Subsequently, several numerical examples are given to illustrate the effectiveness of the proposed model.

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