A generalization of Hull and White formula and applications to option pricing approximation
AbstractBy 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.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 740.
Date of creation: Feb 2004
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Continuous-time option pricing model; stochastic volatility; Malliavin calculus;
Find related papers by JEL classification:
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-05-26 (All new papers)
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