Abstract
We consider the Hull-White short rate model and provide a systematic derivation of an Arrow-Debreu pricing formula for European-style options using operator formalism combined with an exponential expansion formula. This gives rise to a closed-form expression. We propose that the methodology here described is of interest insofar as it is applicable to a wider range of short rate modelling problems involving lognormal rates volatility, local volatility and/or multiple stochastic factors or underlyings.
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