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<p>In this paper, we present a pricing model for an Asset-or-Nothing call option under the mixed modified fractional Hull-White-Vasicek(MMFHWV) model, which incorporates stochastic volatility and stochastic interest rates. Our results show that the option value decreases as <InlineEquation ID="IEq1"> <InlineMediaObject> <ImageObject Color="BlackWhite" FileRef="10479_2025_6883_Article_IEq1.gif" Format="GIF" Height="10" Rendition="HTML" Resolution="72" Type="Linedraw" Width="14" /> </InlineMediaObject> <EquationSource Format="TEX">\(\alpha \)</EquationSource> </InlineEquation> increases and converges to underlying asset value as <InlineEquation ID="IEq2"> <InlineMediaObject> <ImageObject Color="BlackWhite" FileRef="10479_2025_6883_Article_IEq1.gif" Format="GIF" Height="10" Rendition="HTML" Resolution="72" Type="Linedraw" Width="14" /> </InlineMediaObject> <EquationSource Format="TEX">\(\alpha \)</EquationSource> </InlineEquation> decreases. We employ the double mellin transform to obtain the analytical solutions. Furthermore, we use the Monte Carlo approach to estimate the option value in various scenarios of <InlineEquation ID="IEq3"> <InlineMediaObject> <ImageObject Color="BlackWhite" FileRef="10479_2025_6883_Article_IEq1.gif" Format="GIF" Height="10" Rendition="HTML" Resolution="72" Type="Linedraw" Width="14" /> </InlineMediaObject> <EquationSource Format="TEX">\(\alpha \)</EquationSource> </InlineEquation>, providing a robust and efficient method to price vulnerable options. In particular, our contribution significantly expands the existing literature on vulnerable options, providing new insights and a more comprehensive understanding of these complex financial instruments.</p>

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Pricing an asset-or-nothing call option using a mixed fractional hull-white-vasicek with stochastic volatility and interest rate

  • 期刊论文

  • 发表日期：

    2025年10月27日

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  • Eric Djeutcha,
  • Jules SADEFO KAMDEM

摘要

In this paper, we present a pricing model for an Asset-or-Nothing call option under the mixed modified fractional Hull-White-Vasicek(MMFHWV) model, which incorporates stochastic volatility and stochastic interest rates. Our results show that the option value decreases as \(\alpha \) increases and converges to underlying asset value as \(\alpha \) decreases. We employ the double mellin transform to obtain the analytical solutions. Furthermore, we use the Monte Carlo approach to estimate the option value in various scenarios of \(\alpha \) , providing a robust and efficient method to price vulnerable options. In particular, our contribution significantly expands the existing literature on vulnerable options, providing new insights and a more comprehensive understanding of these complex financial instruments.