Comment on “Option pricing under the Merton model of the short rate” by Kung and Lee [Math. Comput. Simul. 80 (2009) 378–386]

In this note, we correct the formula given in Ref. [3] for European call and put option under Merton's model of the short rate. We give a probabilistic derivation making use of the “change of numeraire” technique which is simpler and more standard.

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Year of publication:	2010
Authors:	Cui, Zhenyu ; Mcleish, Don
Published in:	Mathematics and Computers in Simulation (MATCOM). - Elsevier, ISSN 0378-4754. - Vol. 81.2010, 1, p. 1-4
Publisher:	Elsevier
Subject:	Stochastic interest rates \| Change of numeraire \| Call option price \| Merton short rate model

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

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