Author(s)

Niloofar Ghorbani, Andrzej Korzeniowski

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

We present a solution to the problem posed by Zhang et al. [1] regarding Call Option price C_T under linear investment hedging for the stochastic interest rate modeled by a CIR Process. A closed form representation for C_T by expected value of the path-integral along a square functional of n-dimensional Ornstein-Uhlenbeck process is derived. The method is suitable for Monte-Carlo simulation and illustrated by an example.

European Call Option, Linear Stock Investment Strategy, Cox-Ingersoll-Ross Model, Ornstein-Uhlenbeck Process, Numeraire and Martingale Measure

Ghorbani, N. and Korzeniowski, A. (2020) Adaptive Risk Hedging for Call Options under Cox-Ingersoll-Ross Interest Rates. Journal of Mathematical Finance, 10, 697-704. doi: 10.4236/jmf.2020.104040.