Communications of the Korean Mathematical Society (대한수학회논문집)

Korean Mathematical Society (대한수학회)
권호 표지
DOI QR코드

DOI QR Code

THE PRICING OF QUANTO OPTIONS UNDER THE VASICEK'S SHORT RATE MODEL

  • Received : 2015.08.02
  • Published : 2016.04.30
Download PDF
⟨ Previous Next ⟩

Abstract

We derive a closed-form expression for the price of a European quanto call option when both foreign and domestic interest rates follow the Vasicek's short rate model.

Keywords

References

  1. F. Black and M. Scholes, The pricing of options and corporate liabilities, The Journal of Political Economy 81 (1973), no. 3, 637-654. https://doi.org/10.1086/260062
  2. A. J. G. Cairns, Interest Rate Models: an introduction, Princeton University Press, 2004.
  3. J. C. Cox, J. E. Ingersoll, and S. A. Ross, A theory of the term structure of interest rates, Econometrica 53 (1985), no. 2, 385-407. https://doi.org/10.2307/1911242
  4. A. Giese, Quanto adjustments in the presence of stochastic volatility, Risk Magazine 25 (2012), no. 5, 67-71.
  5. Y. Lee and J. Lee, The pricing of quanto options in the double square root stochastic volatility model, Commun. Korean Math. Soc. 29 (2014), no. 3, 489-496. https://doi.org/10.4134/CKMS.2014.29.3.489
  6. O. Vasicek, An equilibrium characterization of the term structure, J. Financial Economics 5 (1977), 177-188. https://doi.org/10.1016/0304-405X(77)90016-2