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| Title | Valuation and Empirical Analysis of Currency Options |
| Creator | 林士貴 Lin, Shih-Kuei Chuang, Ming-Che Wen, Chin-Hsiang |
| Contributor | 金融系 |
| Key Words | Exchange rate ; Interest rate ; Currency option ; Jarrow and yildirim model ; Jump risks ; Correlated jump risks |
| Date | 2020-04 |
| Date Issued | 21-Jan-2021 09:34:37 (UTC+8) |
| Summary | In this paper, we study whether the correlated jump risks of interest and exchange rates play an important role in currency option pricing. We augment the model of Jarrow and Yildirim (2003) with correlated jump risks (herein referred to as the CB-CJ model) and derive the pricing formula for currency options under this model. Using the data of the United States, Japan, European Union, and the United Kingdom, we find that CB-CJ outperforms the geometric Brownian model, the original Jarrow and Yildirim model, and the Jarrow and Yildirim model with independent jump risks because it substantially improves the in-sample and out-of-sample pricing errors in most cases. As a result, we conclude that correlated jump risks are important factors when pricing currency options. |
| Relation | International Review of Economics and Financie, Vol.66, pp.71-91 |
| Type | article |
| DOI | https://doi.org/10.1016/j.iref.2019.10.013 |
| dc.contributor | 金融系 | |
| dc.creator (作者) | 林士貴 | |
| dc.creator (作者) | Lin, Shih-Kuei | |
| dc.creator (作者) | Chuang, Ming-Che | |
| dc.creator (作者) | Wen, Chin-Hsiang | |
| dc.date (日期) | 2020-04 | |
| dc.date.accessioned | 21-Jan-2021 09:34:37 (UTC+8) | - |
| dc.date.available | 21-Jan-2021 09:34:37 (UTC+8) | - |
| dc.date.issued (上傳時間) | 21-Jan-2021 09:34:37 (UTC+8) | - |
| dc.identifier.uri (URI) | http://nccur.lib.nccu.edu.tw/handle/140.119/133639 | - |
| dc.description.abstract (摘要) | In this paper, we study whether the correlated jump risks of interest and exchange rates play an important role in currency option pricing. We augment the model of Jarrow and Yildirim (2003) with correlated jump risks (herein referred to as the CB-CJ model) and derive the pricing formula for currency options under this model. Using the data of the United States, Japan, European Union, and the United Kingdom, we find that CB-CJ outperforms the geometric Brownian model, the original Jarrow and Yildirim model, and the Jarrow and Yildirim model with independent jump risks because it substantially improves the in-sample and out-of-sample pricing errors in most cases. As a result, we conclude that correlated jump risks are important factors when pricing currency options. | |
| dc.format.extent | 918078 bytes | - |
| dc.format.mimetype | application/pdf | - |
| dc.relation (關聯) | International Review of Economics and Financie, Vol.66, pp.71-91 | |
| dc.subject (關鍵詞) | Exchange rate ; Interest rate ; Currency option ; Jarrow and yildirim model ; Jump risks ; Correlated jump risks | |
| dc.title (題名) | Valuation and Empirical Analysis of Currency Options | |
| dc.type (資料類型) | article | |
| dc.identifier.doi (DOI) | 10.1016/j.iref.2019.10.013 | |
| dc.doi.uri (DOI) | https://doi.org/10.1016/j.iref.2019.10.013 |