Pricing currency options in the Heston/CIR double exponential jump-diffusion model

Rehez Ahlip; Laurence A. F. Park; Ante Prodan

Pricing currency options in the Heston/CIR double exponential jump-diffusion model

Rehez Ahlip, Laurence A. F. Park, Ante Prodan

Western Sydney University

Research output: Chapter in Book / Conference Paper › Conference Paper › peer-review

Abstract

![CDATA[We examine currency options in the double exponential jump-diffusion version of the Heston stochastic volatility model for the exchange rate. We assume, in addition, that the domestic and foreign stochastic interest rates are governed by the CIR dynamics. The instantaneous volatility is correlated with the dynamics of the exchange rate return, whereas the domestic and foreign short-term rates are assumed to be independent of the dynamics of the exchange rate and its volatility. The main result furnishes a semi-analytical formula for the price of the European currency call option in the hybrid foreign exchange/interest rates model.]]

Original language	English
Title of host publication	Proceedings of the 9th Finance Conference of the Portuguese Finance Network (PFN), University of Beira Interior, CovilhÃ£, Portugal, 22-24 June 2016
Publisher	University of Beira Interior
Pages	1720-1740
Number of pages	21
ISBN (Print)	9789896543006
Publication status	Published - 2016
Event	Portuguese Finance Network. Finance Conference - Duration: 22 Jun 2016 → …

Conference

Conference	Portuguese Finance Network. Finance Conference
Period	22/06/16 → …

Keywords

money
foreign exchange rates
stochastic analysis
volatility
mathematical models

Cite this

@inproceedings{2367cd108f58435bbb98f2e3ffc5b96b,

title = "Pricing currency options in the Heston/CIR double exponential jump-diffusion model",

abstract = "![CDATA[We examine currency options in the double exponential jump-diffusion version of the Heston stochastic volatility model for the exchange rate. We assume, in addition, that the domestic and foreign stochastic interest rates are governed by the CIR dynamics. The instantaneous volatility is correlated with the dynamics of the exchange rate return, whereas the domestic and foreign short-term rates are assumed to be independent of the dynamics of the exchange rate and its volatility. The main result furnishes a semi-analytical formula for the price of the European currency call option in the hybrid foreign exchange/interest rates model.]]",

keywords = "money, foreign exchange rates, stochastic analysis, volatility, mathematical models",

author = "Rehez Ahlip and Park, {Laurence A. F.} and Ante Prodan",

year = "2016",

language = "English",

isbn = "9789896543006",

pages = "1720--1740",

booktitle = "Proceedings of the 9th Finance Conference of the Portuguese Finance Network (PFN), University of Beira Interior, Covilh{\~A}£, Portugal, 22-24 June 2016",

publisher = "University of Beira Interior",

note = "Portuguese Finance Network. Finance Conference ; Conference date: 22-06-2016",

}

Ahlip, R , Park, LAF & Prodan, A 2016, Pricing currency options in the Heston/CIR double exponential jump-diffusion model. in Proceedings of the 9th Finance Conference of the Portuguese Finance Network (PFN), University of Beira Interior, CovilhÃ£, Portugal, 22-24 June 2016. University of Beira Interior, pp. 1720-1740, Portuguese Finance Network. Finance Conference, 22/06/16.

Pricing currency options in the Heston/CIR double exponential jump-diffusion model. / Ahlip, Rehez ; Park, Laurence A. F.; Prodan, Ante.
Proceedings of the 9th Finance Conference of the Portuguese Finance Network (PFN), University of Beira Interior, CovilhÃ£, Portugal, 22-24 June 2016. University of Beira Interior, 2016. p. 1720-1740.

Research output: Chapter in Book / Conference Paper › Conference Paper › peer-review

TY - GEN

T1 - Pricing currency options in the Heston/CIR double exponential jump-diffusion model

AU - Ahlip, Rehez

AU - Park, Laurence A. F.

AU - Prodan, Ante

PY - 2016

Y1 - 2016

N2 - ![CDATA[We examine currency options in the double exponential jump-diffusion version of the Heston stochastic volatility model for the exchange rate. We assume, in addition, that the domestic and foreign stochastic interest rates are governed by the CIR dynamics. The instantaneous volatility is correlated with the dynamics of the exchange rate return, whereas the domestic and foreign short-term rates are assumed to be independent of the dynamics of the exchange rate and its volatility. The main result furnishes a semi-analytical formula for the price of the European currency call option in the hybrid foreign exchange/interest rates model.]]

AB - ![CDATA[We examine currency options in the double exponential jump-diffusion version of the Heston stochastic volatility model for the exchange rate. We assume, in addition, that the domestic and foreign stochastic interest rates are governed by the CIR dynamics. The instantaneous volatility is correlated with the dynamics of the exchange rate return, whereas the domestic and foreign short-term rates are assumed to be independent of the dynamics of the exchange rate and its volatility. The main result furnishes a semi-analytical formula for the price of the European currency call option in the hybrid foreign exchange/interest rates model.]]

KW - money

KW - foreign exchange rates

KW - stochastic analysis

KW - volatility

KW - mathematical models

UR - http://handle.uws.edu.au:8081/1959.7/uws:36156

UR - http://pfn2016.ubi.pt/

M3 - Conference Paper

SN - 9789896543006

SP - 1720

EP - 1740

BT - Proceedings of the 9th Finance Conference of the Portuguese Finance Network (PFN), University of Beira Interior, CovilhÃ£, Portugal, 22-24 June 2016

PB - University of Beira Interior

T2 - Portuguese Finance Network. Finance Conference

Y2 - 22 June 2016

ER -

Pricing currency options in the Heston/CIR double exponential jump-diffusion model

Abstract

Conference

Keywords

Other files and links

Fingerprint

Cite this