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Quanto fund protection using partial lookback participation

Author

Listed:
  • Lee, Hangsuck
  • Ha, Hongjun
  • Kim, Eunchae
  • Lee, Minha

Abstract

In light of the intricate nature of global fund markets, investors need securities that enable them to manage the values of foreign funds adjusted by exchange rates, commonly referred to as quanto fund values. This paper delves into the development of contracts that protect quanto fund values through partial lookback participation and their valuations. In order to accomplish this, we derive a generalized analytical expected value of a function of state variables and partial extreme, which serves to streamline the process of developing and pricing exotic quanto fund protections. These pricing formulas are useful in determining fair participation rates for a preferred return during a monitoring period. Numerical experiments that showcase the properties of the proposed contracts are provided.

Suggested Citation

  • Lee, Hangsuck & Ha, Hongjun & Kim, Eunchae & Lee, Minha, 2024. "Quanto fund protection using partial lookback participation," The North American Journal of Economics and Finance, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:ecofin:v:73:y:2024:i:c:s1062940824001116
    DOI: 10.1016/j.najef.2024.102186
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    More about this item

    Keywords

    Quanto fund; Partial lookback; Partial quanto extreme; Participation rate;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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