Stock Price model under Stochastic Interest Rate
Date Issued
2009
Date
2009
Author(s)
Chen, Jyun-Rong
Abstract
In this article, we use Wilhelm’s method to give general stochastic interest rate model and show that this model is equivalent to Ho-Lee model, Hull-White model and Heath-Jarrow-Morton model. However we discover that Wilhelm’s was wrong when he incorporated stochastic interest rate with stock price by using stochastic discount. We use another approach to prove that what’s wrong which Wilhelm makes. Finally, we show that Ho-Lee model and Black-Scholes model can coexist.
Subjects
Stochastic interest rate model
Black-Scholes model
Stochastic discounting factor
Zero coupon Bonds
Stochastic stock price
Type
thesis
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ntu-98-R96221039-1.pdf
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