RT Journal Article
SR Electronic
T1 Black–Scholes and Heston Models with Stochastic Interest Rates and Term Structure of Volatilities
JF The Journal of Derivatives
FD Institutional Investor Journals
SP 32
OP 48
DO 10.3905/jod.2019.1.078
VO 27
IS 1
A1 Alberto Bueno-Guerrero
YR 2019
UL https://pm-research.com/content/27/1/32.abstract
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