descriptionPublicationkeyboard_double_arrow_right Article 01 Oct 1990 English Publisher:Oxford University Press (OUP)Journal:Review of Financial Studies, volume 3, pages 573-592 (issn: 0893-9454, eissn: 1465-7368,

Authors: Hull, John; White, Alan;

doi: 10.1093/rfs/3.4.573

Pricing Interest-Rate-Derivative Securities

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Abstract

This article shows that the one-state-variableinterest-rate models of Vasicek (1977) and Cox,Ingersoll, and Ross (1985b) can be extended sothat they are consistent with both the current termstructure of interest rates and either the currentvolatilities of all spot interest rates or the currentvolatilities of all forward interest rates. Theextended Vasicek model is shown to be very tracta-ble analytically. The article compares option pricesobtained using the extended Vasicek model withthose obtained using a number of other models.

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