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Journal articles (1998), Applied Mathematical Finance, pp. 207-225

Pricing Stock and Bond Derivatives with a Multi-factor Gaussian Model

BAJEUX-BESNAINOU I., PORTAIT Roland

The martingale approach is used to price derivatives securities (futures on stock and bonds, options on bonds, stocks and bonds) given a multi-factor Gaussian model of the returns of stocks and bonds. The bond model is similar to Langetieg's. The stock market is affected by systematic and unsystematic risk. The model yields closed-form solutions.

BAJEUX-BESNAINOU, I. and PORTAIT, R. (1998). Pricing Stock and Bond Derivatives with a Multi-factor Gaussian Model. Applied Mathematical Finance, pp. 207-225.