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      Permanent link:
      https://www.ias.ac.in/article/fulltext/sadh/045/0058

    • Keywords

       

      Bermuda option; mixed fractional Vasicek model; zero-coupon bond; Monte Carlo simulation.

    • Abstract

       

      This paper considers the problem of pricing of Bermuda options on zero-coupon bond in which the dynamics of the interest rate model follows the mixed fractional Vasicek model. The strong convergence of the Euler discretization scheme for the mixed fractional Vasicek model is analysed. Specifically, we find an approximate formula for zero-coupon bond price. Numerical experiments are provided and compared for Bermuda-style call and put options with the Monte Carlo simulation approach.

    • Author Affiliations

       

      FARSHID MEHRDOUST1 ALI REZA NAJAFI1 HOSSEIN SAMIMI2

      1. Department of Applied Mathematics, Faculty of Mathematical Sciences, University of Guilan, PO Box: 41938-1914, Rasht, Iran
      2. Department of Statistics, Faculty of Mathematical Sciences, University of Guilan, PO Box: 41938-1914, Rasht, Iran

    • Dates

       
      Published
      February 2020
      Manuscript received
      10 May 2019
      Manuscript revised
      20 December 2019
      Accepted
      27 December 2019
      Final version published online
      26 February 2020

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