Journal ArticleDOI
The Valuation of Currency Options
Nahum Biger,John Hull +1 more
TLDR
For example, a European call option on a foreign currency is an option to buy one unit of the currency on a predetermined date at a predetermined exchange rate as mentioned in this paper, which can be defined in the same way as options on a stock.Abstract:
extended with its underlying assumptions being relaxed. The model has also found many applications in finance. Smith [6] provides a good overall review of the subject. Options on a foreign currency can be defined in the same way as options on a stock. For example, a European call option on a foreign currency is an option to buy one unit of the currency on a predetermined date at a predetermined exchange rate. At the time of writing there is no well-organized market for foreign currency options. However, the Philadelphia, Montreal and Vancouver stock exchanges have all submitted proposals for the creation of such a market.read more
Citations
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New Insights into Smile, Mispricing, and Value at Risk: The Hyperbolic Model
TL;DR: In this article, the authors investigate a new basic model for asset pricing, the hyperbolic model, which allows an almost perfect statistical fit of stock return data, and compare it to the classical Black-Scholes model.
Journal ArticleDOI
Pricing European Currency Options: A Comparison of the Modified Black-Scholes Model and a Random Variance Model
Marc Chesney,Louis O. Scott +1 more
TL;DR: The authors used the modified Black-Scholes model and a random variance option pricing model to study prices of European currency options traded in Geneva, which includes calls and puts on the dollar/Swiss franc exchange rate.
Journal ArticleDOI
Regime switching in foreign exchange rates : Evidence from currency option prices
TL;DR: This article examined the ability of regime-switching models to capture the dynamics of foreign exchange rates and found that a regime switching option valuation model with independent shifts in mean and variance exhibits a closer fit and more accurate variance forecasts than a range of other models.
Journal ArticleDOI
Pricing foreign currency options under stochastic interest rates
Kaushik I. Amin,Robert A. Jarrow +1 more
TL;DR: In this paper, a general framework to price contingent claims on foreign currencies using the Heath et al. (1987) model of the term structure is presented, and closed form solutions are obtained for European options on currencies and currency futures.
Journal ArticleDOI
On the Integration of Production and Financial Hedging Decisions in Global Markets
TL;DR: The integrated operational and financial hedging decisions faced by a global firm who sells to both home and foreign markets are studied and it is shown that the firm's financial hedges strategy ties closely to, and can have both quantitative and qualitative impact on, the company's operational strategy.
References
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Journal ArticleDOI
The Pricing of Options and Corporate Liabilities
Fischer Black,Myron S. Scholes +1 more
TL;DR: In this paper, a theoretical valuation formula for options is derived, based on the assumption that options are correctly priced in the market and it should not be possible to make sure profits by creating portfolios of long and short positions in options and their underlying stocks.
Book
Theory of rational option pricing
TL;DR: In this paper, the authors deduced a set of restrictions on option pricing formulas from the assumption that investors prefer more to less, which are necessary conditions for a formula to be consistent with a rational pricing theory.
Journal ArticleDOI
Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis
TL;DR: In this article, the authors examined the hypothesis that the expected rate of return to speculation in the forward foreign exchange market is zero; that is, the logarithm of the forward exchange rate is the market's conditional expectation of the future spot rate, and they were able to reject the simple market efficiency hypothesis for exchange rates from the 1970s and the 1920s.
Journal ArticleDOI
A model of international asset pricing
TL;DR: In this article, an intertemporal model of international asset pricing is constructed which admits differences in consumption opportunity sets across countries, and it is shown that the real expected excess return on a risky asset is proportional to the covariance of the return of that asset with changes in the world real consumption rate.
Journal ArticleDOI
OPTIONS ON THE MINIMUM OR THE MAXIMUM OF TWO RISKY ASSETS Analysis and Applications
TL;DR: In this article, the authors provide analytical formulas for European put and call options on the minimum or the maximum of two risky assets, which are useful to price a wide variety of contingent claims of interest to financial economists.