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Short-maturity asymptotics for option prices with interest rates effects
Dan Pirjol / Lingjiong Zhu
interest rates / option pricingResource overview

Short-maturity asymptotics for option prices with interest rates effects

Paper2024

by Dan Pirjol, Lingjiong Zhu

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interest ratesoption pricing

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Suggested foundations for options and derivatives pricing and rates and fixed income. Specialist prerequisites vary by paper.

Before you read

  1. The Binomial Model

    Build replication and risk-neutral probabilities in a tractable model.

  2. Market Model and Risk-Neutral Valuation

    Distinguish pricing probabilities from physical forecasts.

  3. The Bank Account, Short Rate, and the Fundamental Pricing Equation

    Understand discounting in a stochastic-rate model.

  4. DV01, Dollar Duration, and One-Factor Price Sensitivity

    Translate yield movements into first-order price risk.

Go further

  1. The Black-Scholes PDE, Formula and Implied Volatility

    Connect the pricing equation, closed-form value and implied volatility.

  2. Bootstrapping the Spot Curve from Market Instruments

    Build a consistent discount curve.

  3. The Vasicek Model: Mean Reversion, Affine Bond Prices, and the Gaussian Distribution

    Study a tractable mean-reverting rate model.

Explore a related reading path

Lesson links open public previews. Access to full lessons depends on the topic and your membership.

Explore Derivatives Pricing and Computational Finance Explore Fixed Income and Interest-Rate Models

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