scholarly journals European Option Pricing for a Stochastic Volatility Lévy Model with Stochastic Interest Rates

2011 ◽  
Vol 01 (03) ◽  
pp. 98-108 ◽  
Author(s):  
Sarisa Pinkham ◽  
Pairote Sattayatham
Keyword(s):  
Option Pricing ◽  
Interest Rates ◽  
Stochastic Volatility ◽  
European Option ◽  
Stochastic Interest Rates ◽  
European Option Pricing ◽  
Stochastic Interest

scholarly journals Pricing Option with Stochastic Interest Rates and Transaction Costs in Fractional Brownian Markets

2018 ◽  
Vol 2018 ◽  
pp. 1-8
Author(s):  
Lina Song ◽  
Kele Li
Keyword(s):  
Interest Rates ◽  
Transaction Costs ◽  
Estimation Methods ◽  
European Option ◽  
Stochastic Interest Rates ◽  
European Option Pricing ◽  
Stochastic Interest ◽  
Two Factors ◽  
Parameter Estimation Methods ◽  
Coupon Bond

This work deals with European option pricing problem in fractional Brownian markets. Two factors, stochastic interest rates and transaction costs, are taken into account. By the means of the hedging and replicating techniques, the new equations satisfied by zero-coupon bond and the nonlinear equation obeyed by European option are established in succession. Pricing formulas are derived by the variable substitution and the classical solution of the heat conduction equation. By the mathematical software and the parameter estimation methods, the results are reported and compared with the data from the financial market.

scholarly journals Option Pricing under Double Stochastic Volatility Model with Stochastic Interest Rates and Double Exponential Jumps with Stochastic Intensity

2020 ◽  
Vol 2020 ◽  
pp. 1-13 ◽  
Author(s):  
Ying Chang ◽  
Yiming Wang
Keyword(s):  
Option Pricing ◽  
Interest Rates ◽  
Stochastic Volatility ◽  
Stochastic Volatility Model ◽  
Stochastic Interest Rates ◽  
Stochastic Intensity ◽  
Volatility Model ◽  
Double Exponential ◽  
Stochastic Interest ◽  
The Impact

We present option pricing under the double stochastic volatility model with stochastic interest rates and double exponential jumps with stochastic intensity in this article. We make two contributions based on the existing literature. First, we add double stochastic volatility to the option pricing model combining stochastic interest rates and jumps with stochastic intensity, and we are the first to fill this gap. Second, the stochastic interest rate process is presented in the Hull–White model. Some authors have concentrated on hybrid models based on various asset classes in recent years. Therefore, we build a multifactor model with the term structure of stochastic interest rates. We also approximated the pricing formula for European call options by applying the COS method and fast Fourier transform (FFT). Numerical results display that FFT and the COS method are much faster than the numerical integration approach used for obtaining the semi-closed form prices. The COS method shows higher accuracy, efficiency, and stability than FFT. Therefore, we use the COS method to investigate the impact of the parameters in the stochastic jump intensity process and the existence of the process on the call option prices. We also use it to examine the impact of the parameters in the interest rate process on the call option prices.

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