FOREIGN EXCHANGE OPTIONS UNDER STOCHASTIC VOLATILITY AND STOCHASTIC INTEREST RATES

被引：12

作者：

Ahlip, Rehez ^{[1
]}

机构：

[1] Univ Western Sydney, Sch Comp & Math, Locked Bag 1797, Penrith, NSW 1797, Australia

来源：

INTERNATIONAL JOURNAL OF THEORETICAL AND APPLIED FINANCE | 2008年 / 11卷 / 03期

关键词：

Foreign exchange options; Ornstein-Uhlenbeck process; stochastic volatility;

D O I：

10.1142/S0219024908004804

中图分类号：

F8 [财政、金融];

学科分类号：

0202 ;

摘要：

In this paper, we present a stochastic volatility model with stochastic interest rates in a Foreign Exchange (FX) setting. The instantaneous volatility follows a mean-reverting Ornstein-Uhlenbeck process and is correlated with the exchange rate. The domestic and foreign interest rates are modeled by mean-reverting Ornstein-Uhlenbeck processes. The main result is an analytic formula for the price of a European call on the exchange rate. It is derived using martingale methods in arbitrage pricing of contingent claims and Fourier inversion techniques.

引用

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页码：277 / 294

页数：18

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