Barrier option pricing for exchange rates under the Levy–HJM processes
AbstractIn this paper, we present closed-forms for the valuation of the barrier option whose underlying is exchange rate under the multi-dimensional Levy process, including stochastic interest rates and stochastic assets. Instantaneous forward interest rates are assumed under the Heath et al. [1992. Econometrica 60, 77–105] framework, and the analytic formulas of the exchange rate barrier option are obtained when the Levy process is restricted in a double exponential process.
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Bibliographic InfoArticle provided by Elsevier in its journal Finance Research Letters.
Volume (Year): 9 (2012)
Issue (Month): 3 ()
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Web page: http://www.elsevier.com/locate/frl
Levy process; Barrier option; HJM;
Find related papers by JEL classification:
- C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
- C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Johnson, Gordon & Schneeweis, Thomas, 1994. "Jump-Diffusion Processes in the Foreign Exchange Markets and the Release of Macroeconomic News," Computational Economics, Society for Computational Economics, vol. 7(4), pages 309-29.
- Heath, David & Jarrow, Robert & Morton, Andrew, 1992. "Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation," Econometrica, Econometric Society, vol. 60(1), pages 77-105, January.
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