Department of Economics and Business - Universitat Pompeu Fabra

Title:: A generalization of Hull and White formula and applications to option pricing approximation
Author:: Elisa Alòs
Date:: February 2004
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.
Keywords:: Continuous-time option pricing model, stochastic volatility, Malliavin calculus
JEL codes:: G130
Area of Research:: Statistics, Econometrics and Quantitative Methods
Published in:: Finance and Stochastics, 10, 353-365, 2006

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