Mellin transform method for european option pricing with hull-white stochastic interest rate

Even though interest rates fluctuate randomly in the marketplace,many option-pricing models do not fully consider their stochastic nature owing to their generally limited impact on option prices. however,stochastic dynamics in stochastic interest rates may have a significant impact on option prices as we take account of issues of maturity,hedging,or stochastic volatility. in this paper,we derive a closed form solution for european options in black-scholes model with stochastic interest rate using mellin transform techniques. © 2014 ji-hun yoon.