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Valuing currency swap contracts in uncertain financial market

Author

Listed:
  • Yi Zhang

    (Renmin University of China)

  • Jinwu Gao

    (Renmin University of China
    North Carolina State University)

  • Zongfei Fu

    (Renmin University of China)

Abstract

Swap is a financial contract between two counterparties who agree to exchange one cash flow stream with the other according to some predetermined rules. When the cash flows are interest payments of different currencies, the swap is called a currency swap. In this paper, it is assumed that the exchange rate follows some uncertain differential equations, and the currency swap contracts in uncertain financial market are discussed. For dealing with long-term, short-term and super-short circumstances, three currency swap models are proposed, respectively. Their explicit solutions are developed through Yao–Chen formula. Moreover, a numerical method is designed for simplifying calculation. Finally, examples are given to show the effectiveness of the theory developed in this paper.

Suggested Citation

  • Yi Zhang & Jinwu Gao & Zongfei Fu, 2019. "Valuing currency swap contracts in uncertain financial market," Fuzzy Optimization and Decision Making, Springer, vol. 18(1), pages 15-35, March.
    • Handle: RePEc:spr:fuzodm:v:18:y:2019:i:1:d:10.1007_s10700-018-9284-5
    DOI: 10.1007/s10700-018-9284-5
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    References listed on IDEAS

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    Cited by:

    1. Gao, Yin & Jia, Lifen, 2021. "Pricing formulas of barrier-lookback option in uncertain financial markets," Chaos, Solitons & Fractals, Elsevier, vol. 147(C).
    2. Yu, Yongjiu & Yang, Xiangfeng & Lei, Qing, 2022. "Pricing of equity swaps in uncertain financial market," Chaos, Solitons & Fractals, Elsevier, vol. 154(C).
    3. Deng, Jie & Qin, Zhongfeng, 2021. "On Parisian option pricing for uncertain currency model," Chaos, Solitons & Fractals, Elsevier, vol. 143(C).
    4. Kai Yao & Zhongfeng Qin, 2021. "Barrier option pricing formulas of an uncertain stock model," Fuzzy Optimization and Decision Making, Springer, vol. 20(1), pages 81-100, March.
    5. Pan, Zeyu & Gao, Yin & Yuan, Lin, 2021. "Bermudan options pricing formulas in uncertain financial markets," Chaos, Solitons & Fractals, Elsevier, vol. 152(C).
    6. Li, Bo & Li, Xiangfa & Teo, Kok Lay & Zheng, Peiyao, 2022. "A new uncertain random portfolio optimization model for complex systems with downside risks and diversification," Chaos, Solitons & Fractals, Elsevier, vol. 160(C).

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