European Option Under Cox-Ingersoll-Ross Model for Stochastic Interest Rate
affiliation not provided to SSRN
May 7, 2012
European option under local volatility and Cox-Ingersoll-Ross model of short rate is computed from one-dimensional partial differential equations: the Black-Scholes equation for option price and the forward Kolmogorov equation for probability transition density. Both the computations are verified by Monte Carlo simulations.
Number of Pages in PDF File: 18
Keywords: European option, Cox-Ingersoll-Ross model, Black-Scholes equation, Kolmogorov equation, Fokker-Planck equation, Probability transition density
JEL Classification: C00, C63, G12working papers series
Date posted: May 7, 2012
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