Comment on "option pricing under the Merton model of the short rate" by Kung and Lee [Math. Comput. Simul. 80 (2009) 378-386]

Zhenyu Cui, Don McLeish

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

In this note, we correct the formula given in Ref. [3] for European call and put option under Merton's model of the short rate. We give a probabilistic derivation making use of the "change of numeraire" technique which is simpler and more standard.

Original languageEnglish
Pages (from-to)1-4
Number of pages4
JournalMathematics and Computers in Simulation
Volume81
Issue number1
DOIs
StatePublished - Sep 2010

Keywords

  • Call option price
  • Change of numeraire
  • Merton short rate model
  • Stochastic interest rates

Fingerprint

Dive into the research topics of 'Comment on "option pricing under the Merton model of the short rate" by Kung and Lee [Math. Comput. Simul. 80 (2009) 378-386]'. Together they form a unique fingerprint.

Cite this