A generalization of Hull and White formula and applications to option pricing approximation

Alòs, Elisa

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A generalization of Hull and White formula and applications to option pricing approximation

Document Type: Working paper

Date: 2004-02-01

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Citation: Finance and Stochastics, 10, 353-365, 2006

Permanent link: http://hdl.handle.net/10230/568

Abstract:

By means of Malliavin Calculus we see that the classical Hull and White formula for option pricing can be extended to the case where the noise driving the volatility process is correlated with the noise driving the stock prices. This extension will allow us to construct option pricing approximation formulas. Numerical examples are presented.

Author: Alòs, Elisa

Other authors: Universitat Pompeu Fabra. Departament d'Economia i Empresa

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