Option pricing with interest rate term structure

[Pushpendu Chakraborty]

I would like to price a simple equity option with interest rate term structure.

I assume that the pricing engine will get the interest rate from the term structure provided. So if i provide piecewise linear term structure, the engine will get the rate from this piecewise curve.

Can somebody confirm this? Most ql examples of equity option uses flat int rate.

Thanks,
Pushpendu

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[Luigi Ballabio]

Yes, the option is going to use the rate corresponding to its maturity.

Luigi

On Fri, May 15, 2015 at 2:03 PM, Pushpendu Chakraborty <[hidden email]> wrote:

I would like to price a simple equity option with interest rate term structure.

I assume that the pricing engine will get the interest rate from the term structure provided. So if i provide piecewise linear term structure, the engine will get the rate from this piecewise curve.

Can somebody confirm this? Most ql examples of equity option uses flat int rate.

Thanks,
Pushpendu

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Widest out-of-the-box monitoring support with 50+ applications
Performance metrics, stats and reports that give you Actionable Insights
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[Pushpendu Chakraborty]

Tjanks Luigi.

On May 15, 2015 8:07 AM, "Luigi Ballabio" <[hidden email]> wrote:

Yes, the option is going to use the rate corresponding to its maturity.

Luigi

On Fri, May 15, 2015 at 2:03 PM, Pushpendu Chakraborty <[hidden email]> wrote:

I would like to price a simple equity option with interest rate term structure.

I assume that the pricing engine will get the interest rate from the term structure provided. So if i provide piecewise linear term structure, the engine will get the rate from this piecewise curve.

Can somebody confirm this? Most ql examples of equity option uses flat int rate.

Thanks,
Pushpendu

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Widest out-of-the-box monitoring support with 50+ applications
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Deep dive visibility with transaction tracing using APM Insight.
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