Equity options and stochastic interest rates : error in Black-Scholes prices and hedges for European- and American-style equity options when short rates are Ornstein-Uhlenbeck

Master Thesis

2006

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University of Cape Town

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This dissertation considers the errors when using Black-Scholes prices and hedges for European equity options (Black&Scholes (1973), Merton (1973)) and American equity options (Karatzas (1988)) in an economy with stochastic interest rates. In particular, we consider an economy with Vasicek (1977) type interest rates.
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Word processed copy.


Includes bibliographical references (leaves 183-188).

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