[KSCI] Korea Science Citation Index Service

http://dx.doi.org/10.14317/jami.2011.29.5_6.1501

BARRIER OPTION PRICING UNDER THE VASICEK MODEL OF THE SHORT RATE

Sun, Yu-dong (Department of Applied Mathematics, Northwestern Polytechnical University)
Shi, Yi-min (Department of Applied Mathematics, Northwestern Polytechnical University)
Gu, Xin (Department of Applied Mathematics, Northwestern Polytechnical University)

Publication Information

Journal of applied mathematics & informatics / v.29, no.5_6, 2011 , pp. 1501-1509 More about this Journal

Abstract

In this study, assume that the stock price obeys the stochastic differential equation driven by mixed fractional Brownian motion, and the short rate follows the Vasicek model. Then, the Black-Scholes partial differential equation is held by using fractional Ito formula. Finally, the pricing formulae of the barrier option are obtained by partial differential equation theory. The results of Black-Scholes model are generalized.

Keywords

barrier option pricing; Vasicek model; Black-Scholes model; fractional Brownian motion;

Citations & Related Records

Reference

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