A generalization of the Hull and White formula with applications to option pricing approximation

A generalization of the Hull and White formula with applications to option pricing approximation

By means of Malliavin calculus we see that the classical Hull and White formula for option pricing can be extended to the case where the volatility and the noise driving the stock prices are correlated. This extension will allow us to describe the effect of correlation on option prices and to derive...

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Veröffentlicht in:Finance and stochastics 2006-09, Vol.10 (3), p.353-365
1. Verfasser: Alòs, Elisa
Format: Artikel
Sprache:eng
Schlagworte:
Approximation
Arbitrage
Asset valuation
Calculus
Correlation
Decomposition
Derivatives
Financial theory
Interest rates
Mathematical models
Monte Carlo simulation
Option pricing
Options markets
Random variables
Securities prices
Stochastic models
Stochastic processes
Stock prices
Studies
Volatility
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Zusammenfassung:By means of Malliavin calculus we see that the classical Hull and White formula for option pricing can be extended to the case where the volatility and the noise driving the stock prices are correlated. This extension will allow us to describe the effect of correlation on option prices and to derive approximate option pricing formulas. [PUBLICATION ABSTRACT]
ISSN:0949-2984
1432-1122
DOI:10.1007/s00780-006-0013-5