[R-SIG-Finance] risk-free rate in option pricing

[Arun.stat]

Dear Xian, as per the Hull's book you should consider a T-Bill with same
maturity as the underlying option contract (as you also said correctly.)
However just make sure that, that rate is expressed in continuous
compounding.

I can also remember that this topic was previously discussed in details here
(just make a search.)

HTH,

Thanks and regards,

_____________________________________________________

Arun Kumar Saha, FRM
QUANTITATIVE RISK AND HEDGE CONSULTING SPECIALIST
Visit me at: http://in.linkedin.com/in/ArunFRM
_____________________________________________________


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