A Moment Matching Method for Option Pricing under Stochastic Interest Rates
A Moment Matching Method for Option Pricing under Stochastic Interest Rates
In this paper we present a simple, but new, approximation methodology for pricing a call option in a Black & Scholes market characterized by stochastic interest rates. The method, based on a straightforward Gaussian moment matching technique applied to a conditional Black & Scholes formula, is quite general and it …