IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Forward Start Options Under Stochastic Volatility And Stochastic Interest Rates

Listed author(s):


    (School of Computing and Mathematics, University of Western Sydney, Penrith South, NSW 1797, Australia)



    (School of Mathematics and Statistics, University of New South Wales, Sydney, NSW 2052, Australia)

Registered author(s):

    Forward start options are examined in Heston's (Review of Financial Studies 6 (1993) 327–343) stochastic volatility model with the CIR (Econometrica 53 (1985) 385–408) stochastic interest rates. The instantaneous volatility and the instantaneous short rate are assumed to be correlated with the dynamics of stock return. The main result is an analytic formula for the price of a forward start European call option. It is derived using the probabilistic approach combined with the Fourier inversion technique, as developed in Carr and Madan (Journal of Computational Finance 2 (1999) 61–73).

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Journal of Theoretical and Applied Finance.

    Volume (Year): 12 (2009)
    Issue (Month): 02 ()
    Pages: 209-225

    in new window

    Handle: RePEc:wsi:ijtafx:v:12:y:2009:i:02:p:209-225
    Contact details of provider: Web page:

    Order Information: Email:

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:wsi:ijtafx:v:12:y:2009:i:02:p:209-225. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tai Tone Lim)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.