کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
5077416 | 1374129 | 2010 | 9 صفحه PDF | دانلود رایگان |
عنوان انگلیسی مقاله ISI
Markov-modulated jump-diffusions for currency option pricing
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موضوعات مرتبط
مهندسی و علوم پایه
ریاضیات
آمار و احتمال
پیش نمایش صفحه اول مقاله
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چکیده انگلیسی
This paper introduces dynamic models for the spot foreign exchange rate with capturing both the rare events and the time-inhomogeneity in the fluctuating currency market. For the rare events, we use a compound Poisson process with log-normal jump amplitude to describe the jumps. As for the time-inhomogeneity in the market dynamics, we particularly stress the strong dependence of the domestic/foreign interest rates, the appreciation rate and the volatility of the foreign currency on the time-varying sovereign ratings in the currency market. The time-varying ratings are formulated by a continuous-time finite-state Markov chain. Based on such a spot foreign exchange rate dynamics, we then study the pricing of some currency options. Here we will adopt a so-called regime-switching Esscher transform to identify a risk-neutral martingale measure. By determining the regime-switching Esscher parameters we then get an integral expression on the prices of European-style currency options. Finally, numerical illustrations are given.
ناشر
Database: Elsevier - ScienceDirect (ساینس دایرکت)
Journal: Insurance: Mathematics and Economics - Volume 46, Issue 3, June 2010, Pages 461-469
Journal: Insurance: Mathematics and Economics - Volume 46, Issue 3, June 2010, Pages 461-469
نویسندگان
Lijun Bo, Yongjin Wang, Xuewei Yang,