PT  - JOURNAL ARTICLE
AU  - Alberto Bueno-Guerrero
TI  - Black–Scholes and Heston Models with Stochastic Interest Rates and Term Structure of Volatilities
AID  - 10.3905/jod.2019.1.078
DP  - 2019 Aug 30
TA  - The Journal of Derivatives
PG  - 32--48
VI  - 27
IP  - 1
4099  - https://pm-research.com/content/27/1/32.short
4100  - https://pm-research.com/content/27/1/32.full
AB  - This article considers the Black–Scholes and Heston models and generalize them to stochastic interest rates and maturity-dependent volatilities. In the Black–Scholes case, the author solves the extended model and provides a concrete form for the term structure of volatilities. In the Heston case, he proves that, under some conditions, the generalized model is equivalent to a hybrid model and finds semi-closed-form solutions in the Hull and White and CIR cases.TOPICS: Options, statistical methods, fixed income and structured finance