Frey, Rüdiger, Sommer, Daniel. 1998. "The generalization of the Geske-formula for compound options to stochastic interest rate is not trivial - a note". Journal of Applied Probability 35 501-509.
BibTeX
Abstract
This note refers to the paper by Geman, El-Karoui and Rochet (1995), in which an extension of the Geske-formula for compound options to the case of stochastic interest rates is proposed. We show that such an extension is not possible in general. However, we point out modifications of Geske's original problem in which closed formulas can still be obtained under stochastic interest rates. In particular we consider the case of an option on a future-style option. Moreover, we sketch a numerical solution to Geske's original problem when interest rates are random.
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Status of publication | Published |
---|---|
Affiliation | WU |
Type of publication | Journal article |
Journal | Journal of Applied Probability |
Citation Index | SCI |
WU-Journal-Rating new | FIN-A |
Language | English |
Title | "The generalization of the Geske-formula for compound options to stochastic interest rate is not trivial - a note" |
Volume | 35 |
Year | 1998 |
Page from | 501 |
Page to | 509 |
URL | http://www.jstor.org/stable/3215704 |
Associations
- People
- Frey, Rüdiger (Details)
- External
- Sommer, Daniel
- Organization
- Institute for Statistics and Mathematics IN (Details)