Author(s)

Andrzej Korzeniowski, Niloofar Ghorbani

Department of Mathematics, University of Texas at Arlington, Arlington, USA.

We derive a Put Option price associated with selling strategy of the underlying security in a random interest rate environment. This extends Put Option pricing under linear investment strategy from the Black-Scholes setting to Hull-White stochastic interest rate model. As an application, Call Option price for the linear investment strategy in the Hull-White model is established. Our results address recent emergence of developing dynamic investment strategies for the purpose of reducing the investor risk exposure associated with European-type options.

European Put Option, Linear Stock Investment Strategy, Zero-Coupon Bond, Change of Numeraire, T-Forward Measure, Hull-White Model

Korzeniowski, A. and Ghorbani, N. (2021) Put Options with Linear Investment for Hull-White Interest Rates. Journal of Mathematical Finance, 11, 152-162. doi: 10.4236/jmf.2021.111007.