Open AccessValuation for an American Continuous-Installment Put Option on Bond under Vasicek Interest Rate Model
Author(s) -
Guoan Huang,
Guohe Deng,
Lihong Huang
Publication year - 2009
Publication title -
journal of applied mathematics and decision sciences
Language(s) - English
Resource type - Journals
eISSN - 1532-7612
pISSN - 1173-9126
DOI - 10.1155/2009/215163
Subject(s) - vasicek model , interest rate , valuation (finance) , bond valuation , short rate model , bond , short rate , optimal stopping , put option , quadrature (astronomy) , econometrics , mathematics , mathematical economics , actuarial science , computer science , economics , yield curve , mathematical optimization , finance , electrical engineering , engineering
The valuation for an American continuous-installment put option on zero-coupon bond is considered by Kim's equations under a single factor model of the short-term interest rate, which follows the famous Vasicek model. In termof the price of this option, integral representations of both the optimal stopping and exercise boundaries are derived. A numerical method is used to approximate the optimal stopping and exercise boundaries by quadrature formulas. Numerical results and discussions are provided
Accelerating Research
Robert Robinson Avenue,
Oxford Science Park, Oxford
OX4 4GP, United Kingdom
Address
John Eccles HouseRobert Robinson Avenue,
Oxford Science Park, Oxford
OX4 4GP, United Kingdom