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The Pricing of Options With an Uncertain Interest Rate: A Discrete-Time Approach

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  • Klaus Sandmann

Abstract

The aim of this paper is to develop a model for the pricing of European options under the assumption of a stochastic interest rate in a discrete-time context. This is accomplished by combining the well-known binomial model for a stock with a binomial model for the spot interest rate. Copyright 1993 Blackwell Publishers.

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  • Klaus Sandmann, 1993. "The Pricing of Options With an Uncertain Interest Rate: A Discrete-Time Approach," Mathematical Finance, Wiley Blackwell, vol. 3(2), pages 201-216.
  • Handle: RePEc:bla:mathfi:v:3:y:1993:i:2:p:201-216
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9965.1993.tb00088.x
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    Cited by:

    1. Flåm, Sjur, 2007. "Option Pricing by Mathematical Programming," Working Papers 2007:10, Lund University, Department of Economics.

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