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

doi:10.1016/j.matcom.2010.06.006

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

School of Business

University of Waterloo

Research output: Contribution to journal › Article › peer-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 language	English
Pages (from-to)	1-4
Number of pages	4
Journal	Mathematics and Computers in Simulation
Volume	81
Issue number	1
DOIs	https://doi.org/10.1016/j.matcom.2010.06.006
State	Published - Sep 2010

Keywords

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

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10.1016/j.matcom.2010.06.006

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

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.",

keywords = "Call option price, Change of numeraire, Merton short rate model, Stochastic interest rates",

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T1 - Comment on "option pricing under the Merton model of the short rate" by Kung and Lee [Math. Comput. Simul. 80 (2009) 378-386]

AU - Cui, Zhenyu

AU - McLeish, Don

PY - 2010/9

Y1 - 2010/9

N2 - 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.

AB - 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.

KW - Call option price

KW - Change of numeraire

KW - Merton short rate model

KW - Stochastic interest rates

UR - https://www.scopus.com/pages/publications/77956263646

UR - https://www.scopus.com/pages/publications/77956263646#tab=citedBy

U2 - 10.1016/j.matcom.2010.06.006

DO - 10.1016/j.matcom.2010.06.006

M3 - Article

AN - SCOPUS:77956263646

SN - 0378-4754

VL - 81

SP - 1

EP - 4

JO - Mathematics and Computers in Simulation

JF - Mathematics and Computers in Simulation

IS - 1

ER -

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

Abstract

Keywords

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