No abstract

No abstract

We present a solution to the problem posed by Zhang et al. [1] regarding Call Option price C T under linear investment hedging for the stochastic interest rate modeled by a CIR Process. A closed form representation for C T by expected value of the path-integral along a square functional of n-dimensional Ornstein-Uhlenbeck process is derived. The method is suitable for Monte-Carlo simulation and illustrated by an example.

No abstract

We derive a Put Option price associated with selling strategy of the underlying security in a random interest rate environment. This extends Put Option pricing under linear investment strategy from the Black-Scholes setting to Hull-White stochastic interest rate model. As an application, Call Option price for the linear investment strategy in the Hull-White model is established. Our results address recent emergence of developing dynamic investment strategies for the purpose of reducing the investor risk exposure associated with European-type options.