Xue Hong
Abstract
By means of stochastic differential equation and martingale methods, we discuss the multidimensional Black-Scholes pricing model under stochastic interest rate, and obtain the pricing formula for the Europe option and exchange option.
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By means of stochastic differential equation and martingale methods, we discuss the multidimensional Black-Scholes pricing model under stochastic interest rate, and obtain the pricing formula for the Europe option and exchange option.
Key concepts: Martingale pricing, Black–Scholes model, Martingale (probability theory), Mathematics, Interest rate, Stochastic differential equation, Rendleman–Bartter model, Finite difference methods for option pricing