TY  - JOUR
TI  - "The generalization of the  Geske-formula for compound options to stochastic interest rate is not trivial - a note"
AB  - 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.
SP  - 501
EP  - 509
UR  - http://www.jstor.org/stable/3215704
PY  - 1998-05-01
JO  - Journal of Applied Probability
AU  - Frey, Rüdiger 
AU  - Sommer, Daniel 
ER -