| Article ID: | iaor20117398 |
| Volume: | 39 |
| Issue: | 4 |
| Start Page Number: | 260 |
| End Page Number: | 264 |
| Publication Date: | Jul 2011 |
| Journal: | Operations Research Letters |
| Authors: | Kanniainen Juho |
| Keywords: | option pricing |
I propose a new option pricing model with stochastic interest rates. The model assumes that underlying dividends are discounted by the stochastic discount rate. The dividend yield becomes stochastic under my assumptions. The call price can be decreasing with respect to interest rates.