A systematic approach to pricing and hedging international derivatives with interest rate risk: analysis of international derivatives under stochastic interest rates
AbstractThis paper deals with the valuation and the hedging of non-path-dependent European options on one or several underlying assets in a model of an international economy allowing for both, interest rate risk and exchange rate risk. Using martingale theory and, in particular, the change of numeraire technique we provide a unified and easily applicable approach to pricing and hedging exchange options on stocks, bonds, futures, interest rates and exchange rates. We also cover the pricing and hedging of compound exchange options.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Applied Mathematical Finance.
Volume (Year): 3 (1996)
Issue (Month): 4 ()
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Web page: http://taylorandfrancis.metapress.com/link.asp?target=journal&id=100141
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- Erik Schlögl, 2002.
"A multicurrency extension of the lognormal interest rate Market Models,"
Finance and Stochastics,
Springer, vol. 6(2), pages 173-196.
- Erik Schl?gl, 1999. "A Multicurrency Extension of the Lognormal Interest Rate Market Models," Research Paper Series 20, Quantitative Finance Research Centre, University of Technology, Sydney.
- Dudenhausen, Antje & Erik Schloegl & Lutz Schloegl, 1999.
"Robustness of Gaussian Hedges and the Hedging of Fixed Income Derivatives,"
Discussion Paper Serie B
422, University of Bonn, Germany, revised Apr 1999.
- A. Dudenhausen & Erik Schl?gl & L. Schl?gl, 1999. "Robustness of Gaussian Hedges and the Hedging of Fixed Income Derivatives," Research Paper Series 19, Quantitative Finance Research Centre, University of Technology, Sydney.
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