## Abstract By applying the HeathβJarrowβMorton (HJM) framework, an analytical approximation for pricing American options on foreign currency under stochastic volatility and double jump is derived. This approximation is also applied to other existing models for the purpose of comparison. There is e
A Pricing Model for American Options with Gaussian Interest Rates
β Scribed by Albert J. Menkveld; Ton Vorst
- Book ID
- 110386927
- Publisher
- Springer US
- Year
- 2000
- Tongue
- English
- Weight
- 114 KB
- Volume
- 100
- Category
- Article
- ISSN
- 0254-5330
No coin nor oath required. For personal study only.
π SIMILAR VOLUMES
Interest rate is a fundamental determinant of asset prices in financial markets. Many stochastic models have been developed by academic researchers in the continuous-time setting (see, e.g., Vasicek [10], Brennan and Schwartz [1 ], Cox, Ingersoll and Ross ). These models provide a rich framework for
The paper describes a general spectral algorithm for numerical evaluation of contingent claims dependent on the term structure of interest rates. The evolution of the interest rates is modeled as a discrete Markov chain in a functional space. The functional basis in the state space and the transitio
American option for interest rate caps and coupon bonds are analyzed in the formalism of quantum finance. Calendar time and future time are discretized to yield a lattice field theory of interest rates that provides an efficient numerical algorithm for evaluating the price of American options. The a