The Pricing of Foreign Currency Futures Options
AbstractWe derive semi-closed form solutions for the forward and futures exchange rates, European foreign currency options, currency forward options, and currency futures options when the domestic and foreign interest rate movements follow mean reverting diffusion processes. These solutions are consistent with the Black-Scholes option formula so that they can be easily applied. The impact of interest rate uncertainty on theoretical prices of currency futures options is too significant to be neglected.
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Bibliographic InfoPaper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm52.
Date of creation: 19 Dec 1996
Date of revision:
Find related papers by JEL classification:
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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