Abstract
In this paper, we extend the stochastic volatility model of Stein and Stein [25], where the volatility is given by a mean-reverting Ornstein-Uhlenbeck process to include stochastic interest rate given by mean-reverting square root process independent of stock returns. A closed-form pricing solution for European options is derived.
| Original language | English |
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| Title of host publication | International Conference on Stochastic Finance, held in Lisbon, Portugal, 26-30 September, 20044 |
| Publisher | Universidade Tecnica de Lisboa, Portugal |
| Number of pages | 1 |
| Publication status | Published - 2005 |
| Event | International Conference on Stochastic Finance - Duration: 1 Jan 2005 → … |
Conference
| Conference | International Conference on Stochastic Finance |
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| Period | 1/01/05 → … |
Keywords
- interest rates
- stochastic analysis
- pricing
- volatility