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Javaheri, Alireza. "Pricing of call options on foreign exchange." Thesis, Massachusetts Institute of Technology, 1994. http://hdl.handle.net/1721.1/35975.
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Thesis (M.S.)--Massachusetts Institute of Technology, Dept. of Electrical Engineering and Computer Science, 1994.Includes bibliographical references (leaves [1]-2).
by Alireza Javaheri.
M.S.
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Sicuaio, Tomé Eduardo. "Knock Out Power Options in Foreign Exchange Markets." Thesis, Uppsala universitet, Analys och sannolikhetsteori, 2014. http://urn.kb.se/resolve?urn=urn:nbn:se:uu:diva-223996.
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Mertlík, Jakub. "Valuation and Hedging of Foreign Exchange Barrier Options." Doctoral thesis, Vysoká škola ekonomická v Praze, 2004. http://www.nusl.cz/ntk/nusl-77859.
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The main aim of this thesis is in analyzing and empirically testing the various valuation models and hedging schemes of foreign exchange barrier options and their robustness with respect to changing of market conditions. The purpose of the main empirical section is to get a detailed understanding of the static and dynamic performance of the analyzed models for the barrier options payoff mainly in the extreme market conditions, where we performed a benchmarking of the various hedging schemes. As a by-product, we analyzed the accomplishment of some of the model assumptions in real world setting, and the model dependency of the barrier options.
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Ren, Peter. "An Analysis of Market Efficiency for Exchange-traded Foreign Exchange Options on an Intraday Basis." Thesis, University of North Texas, 2015. https://digital.library.unt.edu/ark:/67531/metadc801929/.
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This study examines the comparative magnitude of disturbances in intraday data for exchange traded foreign exchange (FX) options. An in-depth time series analysis on the frequency and extent of discrepancies in the disturbances is conducted. The purpose of this study is twofold. First, using intraday data and trading volume, this study attempts to determine whether both put-call parity and lower boundary conditions consistently hold for exchange traded options written on U.S. dollar denominated options on the Euro trading on the Philadelphia Stock Exchange (PHLX). Second, this study attempts to investigate the magnitude of any discrepancies that may exist due to a temporary cessation of either put-call parity or lower boundary conditions. Intraday (tick-by-tick) bid prices, ask prices, and trading volume on U.S. dollar denominated European style call options and put options on the Euro are obtained. Option data is collected through a Structured Query Language (SQL) request from the Bloomberg database. Corresponding tick-by-tick spot rates for the underlying exchange rate are obtained for the same time period. Tick-by-tick 3-month Treasury bill rates are obtained to for use as the relevant risk-free interest rate. The primary data set spans an approximate one month period from 11/1/2011 to 12/6/2011. Call and option pricing data for near-the-money exercise prices are obtained for options expiring in December 2011, January 2012, February 2012, March 2012, June 2012, and September 2012. A total of 7,212 ticks (minutes) are analyzed for the conversion strategy and 7,209 ticks are analyzed for the reversal strategy. The data is structured into an unbalanced panel data set (cross-sectional time series data) using put-call pairs as the cross sectional units and ticks as the time-series unit. To test the efficiency of the foreign exchange options market, lower boundary and put-call parity conditions were tested on tick-by-tick currency option data. Analysis shows that lower boundary conditions hold for the overwhelming majority of options, with less than 0.0001% of violations for the observed options. A more detailed econometric analysis was prepared to test the put-call parity condition for currency options. A fixed effects model specification is used to describe the put-call parity relationship. Based on the analysis, it is possible to obtain arbitrage profits in the short run through the use of either a conversion or reversal strategy even after accounting for transaction costs. Taking the first differences of the variables resulted in a model with stationary variables and statistically significant estimators. The inclusion of dummy variables for moneyness did not add significant explanatory power to the deterministic put-call parity relationship. For both first differences of conversion and reversal strategies, the large t-statistics for the slope coefficients and intercept terms indicate a rejection of the null hypothesis, H0: λ0 = 0 and λ1 = 1 after adjusting for standard error. This implies that once transaction costs are adjusted for, put-call parity does not hold. However, the intercept term is only very slightly negative, and the intercept term is only slightly less than one in both cases. This implies that when put-call parity is violated, arbitrage profit should be relatively small.
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Spitz, David Evan. "Optimization models for foreign exchange rate hedging using currency options." Thesis, Massachusetts Institute of Technology, 1989. http://hdl.handle.net/1721.1/33479.
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Yan, Bingcheng. "Cross-market interactions, price discovery dynamics, and market quality measurement /." Thesis, Connect to this title online; UW restricted, 2005. http://hdl.handle.net/1773/7375.
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Tjirongo, Meshack Tunee. "Exchange rate policy options for Namibia." Thesis, University of Oxford, 1998. http://ora.ox.ac.uk/objects/uuid:fdb75211-db30-4393-a6f7-61d46ff4b9b7.
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The thesis assesses the costs and benefits of Namibia's membership of the CMA to determine whether the CMA is an optimal currency area at least from the perspective of Namibia. This issue is examined from two main perspectives: (a) whether real exchange rate (RER) adjustment is frustrated by the inability to use the nominal exchange rate as an instrument of adjustment. Evidence of persistent RER misalignment may be seen as a necessary condition for an independent nominal exchange rate regime, however, it is not sufficient.(b) In this case, we examine whether nominal devaluations will have sustained effects on RER adjustment, given Namibia's structural features, such as the high degree of openness and a small nontradable sector. An equilibrium RER for Namibia is estimated using a single equation model of RER determination. The model is used to compute RER misalignments to determine whether there are sustained long periods of misalignments. To test whether nominal exchange rates can be effective in changing relative prices, a simple model was developed to measure pass-through of foreign price and exchange rate changes to domestic prices and wages. This provides useful information regarding whether nominal devaluations can be sustained. The results show that RER misalignments have been small, while the extent and speed of pass-through is complete and instantaneous for most items, suggesting that nominal devaluations in Namibia are not likely to have real effects. Even if it was the case that monetary autonomy cannot be supported on grounds of affecting relative prices, it may nevertheless be important for Namibia to pursue an independent exchange rate strategy. To examine this possibility, the analysis was extended by looking at costs and benefits of OCAs which do not rely on the ability to change relative prices. Benefits arising from savings on transactions costs and on foreign exchange reserves amounted to 3.8% and 2.4% of GDP, respectively. Further, we demonstrated that past "shocks" between Namibia and South Africa were highly correlated. The findings of the thesis suggest that the CMA is an optimal exchange regime for Namibia.
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Steil, Benn Lawrence. "The use of currency options in hedging foreign exchange exposure risk." Thesis, University of Oxford, 1991. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.316827.
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Reyes, Cecilia Gonzales. "Statistical properties of daily returns on foreign exchange rates and a test of the Black-Scholes paradigm on foreign exchange options." Thesis, London Business School (University of London), 1992. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.296920.
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Yan, Chi-kwan, and 顔志軍. "The hedging role of options and futures with mismatched currencies." Thesis, The University of Hong Kong (Pokfulam, Hong Kong), 2000. http://hub.hku.hk/bib/B31954728.
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Yan, Chi-kwan. "The hedging role of options and futures with mismatched currencies." Hong Kong : University of Hong Kong, 2000. http://sunzi.lib.hku.hk/hkuto/record.jsp?B23425076.
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Lee, Chi-ming Simon. "A study of Hong Kong foreign exchange warrants pricing using black-scholes formula /." [Hong Kong] : University of Hong Kong, 1992. http://sunzi.lib.hku.hk/hkuto/record.jsp?B13302838.
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Arabi, Alireza, and Maziar Saei. "Simple foreign currency option Hedge strategies A comparison of Option contracts versus Forward contracts." Thesis, Mälardalens högskola, Akademin för hållbar samhälls- och teknikutveckling, 2010. http://urn.kb.se/resolve?urn=urn:nbn:se:mdh:diva-9977.
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The use of currency options has been grown widely during the latest years. This paper tries to answer whether hedge strategies using currency options are superior to forward exchange contracts or not.
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Tsu, Maria E. "Dynamic analysis of an open economy and foreign exchange risk management using path-dependent options." Thesis, This resource online, 1994. http://scholar.lib.vt.edu/theses/available/etd-06112009-063829/.
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Cozma, Andrei. "Numerical methods for foreign exchange option pricing under hybrid stochastic and local volatility models." Thesis, University of Oxford, 2017. https://ora.ox.ac.uk/objects/uuid:44a27fbc-1b7a-4f1a-bd2d-abeb38bf1ff7.
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In this thesis, we study the FX option pricing problem and put forward a 4-factor hybrid stochastic-local volatility model. The model, which describes the dynamics of an exchange rate, its volatility and the domestic and foreign short rates, allows for a perfect calibration to European options and has a good hedging performance. Due to the high-dimensionality of the problem, we propose a Monte Carlo simulation scheme that combines the full truncation Euler scheme for the stochastic volatility component and the stochastic short rates with the log-Euler scheme for the exchange rate. We analyze exponential integrability properties of Euler discretizations for the square-root process driving the stochastic volatility and the short rates, properties which play a key role in establishing the finiteness of moments and the strong convergence of numerical approximations for a large class of stochastic differential equations in finance, including the ones studied in this thesis. Hence, we prove the strong convergence of the exchange rate approximations and the convergence of Monte Carlo estimators for a number of vanilla and exotic options. Then, we calibrate the model to market data and discuss its fitness for pricing FX options. Next, due to the relatively slow convergence of the Monte Carlo method in the number of simulations, we examine a variance reduction technique obtained by mixing Monte Carlo and finite difference methods via conditioning. We consider a purely stochastic version of the model and price vanilla and exotic options by simulating the paths of the volatility and the short rates, and then evaluating the "inner" Black-Scholes-type expectation by means of a partial differential equation. We prove the convergence of numerical approximations and carry out a theoretical variance reduction analysis. Finally, we illustrate the efficiency of the method through a detailed quantitative assessment.
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Kaehler, Juergen. "Stochastic models of exchange-rate dynamics and their implications for the pricing of foreign-currency options." Thesis, London School of Economics and Political Science (University of London), 1995. http://etheses.lse.ac.uk/1402/.
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The aim of this study is to find a suitable approach to model econometrically exchange-rate dynamics. In the first chapter, I examine the empirical properties of four exchange rates. The data used are daily, weekly, monthly and quarterly exchange rates of the German mark, the British pound, the Swiss franc, and the Japanese yen against the U.S. dollar from July 1974 to December 1987.1 study the moment properties and time-series properties of these exchange rates and find in daily and weekly data leptokurtosis and heteroskedasticity. On the other hand, the hypotheses of no serial correlation, of a constant mean of zero, and of a symmetric distribution cannot be rejected. The fact that the daily and weekly data are not strictly equi-distant does not have a strong impact on these empirical regularities. In chapter 2, static distributional models (mixture of distributions, compound Poisson process, Student distribution, and stable Paretian distributions) are estimated. Chi-squared goodness-of-fit tests reject these models. Direct inferential evidence against stable distributions is found by estimating the characteristic exponent by FFT and by estimating the exponent of regularly varying tails. In chapter 3, dynamic models of heteroskedasticity (ARCH and Markov-switching models) are introduced. Quite satisfactory results are obtained for the EGARCH model and the Markov-switching model whereas the ARCH, GARCH and GARCH-t models are in conflict with stationarity conditions for the variance. Chapter 4 compares the static and dynamic models with respect to goodness-of-fit and forecasting performance. With respect to goodness-of-fit criteria, the dynamic models appear to be superior to the static models. Furthermore, the dynamic models outperform a naive model of constant variance with respect to unbiasedness but not with respect to precision. Chapter 5 studies the option-price implications of the static and dynamic models. The spot-rate effects of static models are rather small and they disappear, as expected, under temporal aggregation. GARCH and EGARCH models, on the other hand, imply higher option prices compared to Black-Scholes option prices along the whole spectrum of moneyness. Only the Markov-switching model is compatible with observed smile effects.
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Buck, Alexander Wolfram. "Cross-currency hedging with multiple options." reponame:Repositório Institucional do FGV, 2017. http://hdl.handle.net/10438/19379.
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Financial derivatives are broadly used for hedging purposes by large financial and non-financial corporations in developed countries. Thereof, currency derivatives represent the biggest class. For some currencies, foreign exchange exposure, for example arising from exports or foreign investments, cannot be hedged due to illiquid or nonexistent derivative markets. However, a third currency with liquid derivative markets exists and can be used to cross-hedge the exposure. This thesis examines whether using options with multiple strikes can improve the hedging performance in such a case. Several stochastic models commonly applied in the literature to foreign exchange markets are used for the out-of-sample hedging portfolio construction and applied to currencies in the regions Latin America, Europe and East/Southeast Asia between 2012 and 2016. This paper delivers two main results: Firstly, it is shown that adding options is not beneficial mainly due to model and estimation errors which increase risk. Secondly, it is shown that if the US-Dollar exchange rate is not cross-hedgeable, the exchange rate with the third currency must be, unless the foreign currency is highly volatile. As a consequence, cross-hedging can be successfully applied to at least one of those exchange rates. However, it is optimal to use only forwards in that case.
Derivativos financeiros são amplamente utilizados com finalidade de hedge por grandes corporações financeiras e não-financeiras em países desenvolvidos. Nesse sentido, derivativos de câmbio representam a classe mais expressiva. Para algumas moedas, a exposição cambial resultante por exemplo de exportações ou investimentos externos não pode ser coberta devido à iliquidez ou inexistência de mercados de derivativos. No entanto, existe um terceiro câmbio de mercados de derivativos líquidos que pode ser utilizado para cobrir a exposição cambial com cross-hedge. A presente tese examina se o uso de opções com múltiplos preços de exercício pode melhorar o desempenho de hedge em tal caso. Vários modelos estocásticos comumente aplicados na literatura a mercados de câmbio são utilizados para a construção out-of-sample de um portfolio de hedging e aplicados a câmbios na América Latina, Europa e Leste/Sudeste asiático entre 2012 e 2016. Esse trabalho chega a dois resultados centrais. O primeiro demonstra que não é benéfico adicionar opções sobretudo em virtude de erros de modelo e estimativa que elevam riscos. O segundo demonstra que se a taxa de câmbio do dólar americano não permite cross-hedging, a taxa de câmbio do terceiro câmbio precisa permitir, a menos que a moeda estrangeira seja altamente volátil. Consequentemente, cross-hedging pode ser aplicado com sucesso a pelo menos uma destas taxas de câmbio. Entretanto, é aconselhável utilizar apenas forwards nesse caso.
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Lagerstam, Catharina. "Hedging of contracts, anticipated positions and tender offers : a study of corporate foreign exchange rate risk and/or price risk." Doctoral thesis, Stockholm : Economic Research Institute, Stockholm School of Economics [Ekonomiska forskningsinstitutet vid Handelshögsk.] (EFI), 1990. http://www.hhs.se/efi/summary/306.htm.
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Lee, Chi-ming Simon, and 李志明. "A study of Hong Kong foreign exchange warrants pricing using black-scholes formula." Thesis, The University of Hong Kong (Pokfulam, Hong Kong), 1992. http://hub.hku.hk/bib/B3126542X.
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Ruggins, Sarah Marie Elizabeth. "Building blocks : a historical sociology of the innovation and regulation of exchange traded funds in the United States, 1970-2000." Thesis, University of Edinburgh, 2018. http://hdl.handle.net/1842/29505.
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Between 1993 and 2016, the U.S. exchange traded fund (ETF) market has proliferated from one product worth $6.5 million USD to 1,455 products worth over $2 trillion USD. Despite its dramatic growth, the ETF market has yet to be the subject of sociological inquiry even though fields such as the social studies of finance have begun examining the origins of index derivatives (Millo 2007), options (MacKenzie 2006), hedge funds (Hardie and MacKenzie 2007), and foreign exchange markets (Knorr Cetina and Bruegger 2002). Thus, the purpose of this dissertation is to provide the first historical sociology of ETF innovation in the United States, using an approach inspired by the social studies of finance. This project empirically traces the emergence of the ETF by compiling an account of precursory strategies, concept development, regulatory negotiations, and early product marketing. The concept of agencement is used to frame the historical narrative of the ETF as a product of two distinct assemblages that formed in the U.S. between 1970 and 2000: first, the socio-technical integration between humans and their technologies that affected trading strategies, and second, the collaborative relationships that were formed between innovators and regulators. The mixed qualitative research consists of 36 interviews triangulated with archival records, documents sourced through Freedom of Information Act requests, private collections, and government files. Concluding analysis suggests that strategies foreshadowing the ETF began to emerge as early as the 1970s, and innovator-regulator collaborations were integral to early product qualification - a process not yet explored in literature on financial regulation.
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Rafiou, AS. "Foreign Exchange Option Valuation under Stochastic Volatility." University of the Western Cape, 2009. http://hdl.handle.net/11394/7777.
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>Magister Scientiae - MScThe case of pricing options under constant volatility has been common practise for decades. Yet market data proves that the volatility is a stochastic phenomenon, this is evident in longer duration instruments in which the volatility of underlying asset is dynamic and unpredictable. The methods of valuing options under stochastic volatility that have been extensively published focus mainly on stock markets and on options written on a single reference asset. This work probes the effect of valuing European call option written on a basket of currencies, under constant volatility and under stochastic volatility models. We apply a family of the stochastic models to investigate the relative performance of option prices. For the valuation of option under constant volatility, we derive a closed form analytic solution which relaxes some of the assumptions in the Black-Scholes model. The problem of two-dimensional random diffusion of exchange rates and volatilities is treated with present value scheme, mean reversion and non-mean reversion stochastic volatility models. A multi-factor Gaussian distribution function is applied on lognormal asset dynamics sampled from a normal distribution which we generate by the Box-Muller method and make inter dependent by Cholesky factor matrix decomposition. Furthermore, a Monte Carlo simulation method is adopted to approximate a general form of numeric solution The historic data considered dates from 31 December 1997 to 30 June 2008. The basket contains ZAR as base currency, USD, GBP, EUR and JPY are foreign currencies.
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Gregová, Silvia. "Špecifiká riadenia menových operácií nadnárodných firiem." Master's thesis, Vysoká škola ekonomická v Praze, 2012. http://www.nusl.cz/ntk/nusl-199943.
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International companies perform business transactions in different countries all over the world and must be able to manage their financial assets in various currencies. Significant foreign exchange alteration can markedly harm market value of any company. The companies use so called 'hedging' to avoid such situations. The aim of this master thesis is to analyze specifics of currency operations based on a case study in the international company and its transaction exposure. The thesis discovers that the selected company uses only two types of 'hedging'.
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Benson, Robert D. "Market models and exposure management in foreign exchange." Thesis, Imperial College London, 1991. http://hdl.handle.net/10044/1/8659.
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Krishnaswamy, Roopa. "The Garman Kohlhagen Model for Foreign Exchange Option Pricing: Derivation and Application." Thesis, The University of Arizona, 2014. http://hdl.handle.net/10150/321771.
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Mozayyan, Esfahani Sina. "Algorithmic Trading and Prediction of Foreign Exchange Rates Based on the Option Expiration Effect." Thesis, KTH, Matematisk statistik, 2019. http://urn.kb.se/resolve?urn=urn:nbn:se:kth:diva-252297.
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The equity option expiration effect is a well observed phenomenon and is explained by delta hedge rebalancing and pinning risk, which makes the strike price of an option work as a magnet for the underlying price. The FX option expiration effect has not previously been explored to the same extent. In this paper the FX option expiration effect is investigated with the aim of finding out whether it provides valuable information for predicting FX rate movements. New models are created based on the concept of the option relevance coefficient that determines which options are at higher risk of being in the money or out of the money at a specified future time and thus have an attraction effect. An algorithmic trading strategy is created to evaluate these models. The new models based on the FX option expiration effect strongly outperform time series models used as benchmarks. The best results are obtained when the information about the FX option expiration effect is included as an exogenous variable in a GARCH-X model. However, despite promising and consistent results, more scientific research is required to be able to draw significant conclusions.Effekten av aktieoptioners förfall är ett välobserverat fenomen, som kan förklaras av delta hedge-ombalansering och pinning-risk. Som följd av dessa fungerar lösenpriset för en option som en magnet för det underliggande priset. Effekten av FX-optioners förfall har tidigare inte utforskats i samma utsträckning. I denna rapport undersöks effekten av FX-optioners förfall med målet att ta reda på om den kan ge information som kan användas till prediktioner av FX-kursen. Nya modeller skapas baserat på konceptet optionsrelevanskoefficient som bestämmer huruvida optioner har en större sannolikhet att vara "in the money" eller "out of the money" vid en specificerad framtida tidpunkt och därmed har en attraktionseffekt. En algoritmisk tradingstrategi skapas för att evaluera dessa modeller. De nya modellerna baserade på effekten av FX-optioners förfall överpresterar klart jämfört med de tidsseriemodeller som användes som riktmärken. De bästa resultaten uppnåddes när informationen om effekten av FX-optioners förfall inkluderas som en exogen variabel i en GARCH-X modell. Dock, trots lovande och konsekventa resultat, behövs mer vetenskaplig forskning för att kunna dra signifikanta slutsatser.
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Vaculík, Martin. "Řízení kurzového rizika ve společnosti IMP Jablonec." Master's thesis, Vysoká škola ekonomická v Praze, 2008. http://www.nusl.cz/ntk/nusl-4893.
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The diploma paper offers a complex view on hedging of a foreign exchange risk in a concrete company, which is highly dependent on export. Preliminary theoretical part sums up all the possibilities how to avoid risk, including hedging or financial derivatives. Specific attention is paid to in practise always more popular option strategies. Practical part then try to apply all the acquired knowledge on a concrete company. After the complex analysis of revenues and expenditures is presented analysis and evaluation of the whole hedging strategy.
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Sun, Yu. "Analytically tractable stochastic volatility models in asset and option pricing." Doctoral thesis, Università Politecnica delle Marche, 2016. http://hdl.handle.net/11566/243100.
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Questa tesi si compone di quattro saggi sui modelli stocastici di volatilità in asset e option pricing. Più precisamente, questa tesi si concentra sul tasso di interesse stocastico e sui modelli di volatilità stocastica multiscala, con applicazioni in vari prodotti finanziari. Nel primo saggio viene presentato un modello ibrido Heston-CIR (HCIR) con un tasso di interesse stocastico. In questo saggio, sono state dedotte formule elementari esplicite per i momenti relativi alle distribuzioni dei prezzi delle azioni, nonché formule efficaci per approssimare i prezzi delle opzioni. Utilizzando i prezzi di call e put options europei sul l'indice S&P 500 americano, questo studio empirico dimostra che il modello HCIR è migliore del modello di Heston nell'interpretazione e nella previsione dei prezzi di call e put options. Il secondo saggio è un ulteriore estensione del modello HCIR con due diverse applicazioni. La prima applicazione utilizza il modello HCIR per interpretare la struttura a termine dei rendimenti e per prevedere la loro tendenza al rialzo /ribasso. La seconda analisi è basata sui valori della “long-term health endowment policy”. L'analisi empirica mostra che il tasso di interesse stocastico gioca un ruolo cruciale come fattore di volatilità e fornisce un modello multi-fattore che supera il modello di Heston nel predire prezzo della polizza assicurativa sanitaria. Nel terzo saggio è stato proposto un modello ibrido di tipo Heston Hull-White (HHW) per descrivere le dinamiche di un prezzo di asset con volatilità e tasso di interesse stocastici che tiene conto di valori negativi. Nel lavoro sono state dedotte sia formule elementari esplicite per la funzione di densità di probabilità di transizione della variabile prezzi degli asset che formule in forma chiusa per stimare il prezzo delle opzioni. Nella prima analisi empirica è stato calibrato il modello HHW utilizzando la cosiddetta implied volatility. La seconda analisi empirica si concentra sui prezzi di futures Eurodollar e i corrispondenti prezzi delle opzioni europee con una generalizzazione del modello di Heston con tassi di interesse stocastici. I risultati relativi all’approssimazione e alla previsione sono molto interessanti. Ciò conferma l'efficienza del modello di HHW e la necessità di considerare possibili valori negativi di tasso di interesse. Il quarto saggio descrive un modello di Heston ibrido e multiscala per il tasso di cambio a pronti FX per poter considerare tassi di interesse stocastici. Il trattamento analitico del modello è descritto in dettaglio sia considerando delle misure legate alla fisica che misura di neutralità al rischio. In particolare, è stata derivata una formula per la funzione di densità di transizione di probabilità usando un integrale a una dimensione di una funzione integrale elementare che viene utilizzato per il prezzaggio delle opzioni call e put European Vanilla.This dissertation consists of four related essays on stochastic volatility models in asset and option pricing. More precisely, this dissertation focuses on stochastic interest rate and multiscale stochastic volatility models, with applications in various financial products. In first essay, a hybrid Heston-CIR (HCIR) model with a stochastic interest rate process is presented. In this essay, explicit elementary formulas for the moments of the asset price variables as well as efficient formulas to approximate the option prices are deduced. Using European call and put option prices on U.S. S&P 500 index, empirical study shows that the HCIR model outperforms Heston model in interpreting and predicting both call and put option prices. The second essay is a further extension of the HCIR model with two different applications. The first application is using HCIR model to interpret bond yield term structure and to forecast their upward/downward trend. The second analysis is based on the values of the long-term health endowment policy. The empirical analysis shows that the stochastic interest rate plays a crucial role as a volatility factor and provides a multi-factor model that outperforms the Heston model in predicting health endowment policy price. In the third essay, a hybrid Heston Hull-White (HHW) model is designed to describe the dynamics of an asset price under stochastic volatility and interest rate that allows negative values. Explicit elementary formulas for the transition probability density function of the asset price variable and closed-form formulas to approximate the option prices are deduced. In first empirical analysis, the HHW model is calibrated by using implied volatility. The second empirical analysis focuses on the Eurodollar futures prices and the corresponding European options prices with a generalization of the Heston model in the stochastic interest rate framework. Both the results are impressive for approximation and prediction. This confirms the efficiency of HHW model and the necessary to allow for negative values of interest rate. The fourth essay describes a multiscale hybrid Heston model of the spot FX rate which is an extension of the model De Col, Gnoatto and Grasselli 2013 in order to allow stochastic interest rate. The analytical treatment of the model is described in detail both under physical measure and risk neutral measure. In particular, a formula for the transition probability density function is derived as a one dimensional integral of an elementary integral function which is used to price European Vanilla call and put options.
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Bovo, Vitor Juliano. "Volatility Triggered Range Forward (VTRF): an instrument for protection against volatility fluctuations in the BRL/USD pair." reponame:Repositório Institucional do FGV, 2011. http://hdl.handle.net/10438/8552.
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Este trabalho propõe um instrumento capaz de absorver choques no par BRL/USD, garantindo ao seu detentor a possibilidade de realizar a conversão entre essas moedas a uma taxa observada recentemente. O Volatility Triggered Range Forward assemelha-se a um instrumento forward comum, cujo preço de entrega não é conhecido inicialmente, mas definido no momento em que um nível de volatilidade pré-determinado for atingido na cotação das moedas ao longo da vida do instrumento. Seu cronograma de ajustes pode ser definido para um número qualquer de períodos. Seu apreçamento e controle de riscos é baseado em uma árvore trinomial ponderada entre dois possíveis regimes de volatilidade. Esses regimes são determinados após um estudo na série BRL/USD no período entre 2003 e 2009, baseado em um modelo Switching Autoregressive Conditional Heteroskedasticity (SWARCH).
This work proposes an instrument able to absorb shocks in the BRL/USD rate, ensuring its holder the capability of doing foreign currency exchange at some immediate prevailing rate. The Volatility Triggered Range Forward resembles a plain-vanilla forward whose delivery price is unknown initially and will be set once a pre-determined level of volatility threshold is reached in the exchange rate along the instrument’s life. Its payoff schedule can be set for any number of periods. Pricing and risk management is based on a trinomial lattice weighted between two possible regimes of volatility. These regimes are determined after a study of the BRL/USD series for the period between 2003 and 2009, based on a Switching Autoregressive Conditional Heteroskedasticity (SWARCH) model.
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"Currency options in Asia Pacific." Chinese University of Hong Kong, 1989. http://library.cuhk.edu.hk/record=b5885997.
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Lin, Rui Feng, and 林瑞峰. "A study on replicating options of Taiwan foreign exchange market." Thesis, 1995. http://ndltd.ncl.edu.tw/handle/13181969509288036271.
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"A study of the currency options market in Hong Kong." Chinese University of Hong Kong, 1988. http://library.cuhk.edu.hk/record=b5885872.
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"A Review of foreign exchange instruments in Hong Kong and the development of currency warrant." Chinese University of Hong Kong, 1992. http://library.cuhk.edu.hk/record=b5887154.
Full textAbstract:
by Law Kwok Fu, Frank.Thesis (M.B.A.)--Chinese University of Hong Kong, 1992.
Includes bibliographical references (leaf 34).
ACKNOWLEDGEMENT --- p.2
Chapter 1 . --- INTRODUCTION --- p.3
Chapter 2. --- SPOT CONTRACT --- p.7
Chapter 3. --- FORWARD CONTRACT --- p.8
Chapter 4. --- CURRENCY FUTURES --- p.10
Chapter 5. --- CURRENCY OPTIONS --- p.14
Chapter 6. --- CURRENCY WARRANTS --- p.17
Chapter 7. --- CONCLUSION. --- p.32
BIBLIOGRAPHY
APPENDIX
Chapter 1. --- Some of currency futures and options listed in overseas exchanges --- p.35
Chapter 2. --- Details of currency warrants available in the market --- p.37
Chapter 3 . --- Raw data --- p.38
Chapter 4. --- Graphs of the DM spot rate and the daily price movements of 3 warrants --- p.41
Chapter 5-7. --- The relative daily change in DM spot rate in % against the daily change in price of the 3 DM warrants --- p.45
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Chen, Chia-Wei, and 陳佳葦. "Exchange Rate Volatility and Foreign Direct Investment: An Empirical Study of Real Options Approach." Thesis, 2008. http://ndltd.ncl.edu.tw/handle/99457830072449195299.
Full textAbstract:
碩士元智大學
國際企業學系
96
This study examines whether the volatility of exchange rate affects the level of FDI (foreign direct investment) by using data of Taiwanese firms. Based on the real options theory we expect a negative impact of exchange rate volatility on FDI. We construct a series of weighted exchange rate specifically for each firm from a sample of TSEC (Taiwan Stock Exchange Corporation) listed non-financial firms from 1999 to 2006. We employ the overseas sales and asset of individual firm as the weights and thus can also derive the exchange rate volatility for each firm. In this study we also investigated if the announcement of SFAS 35 significantly affects the foreign investment strategy of Taiwanese firms. By employing a firm-level unbalance data and panel data of outward FDI of Taiwanese firms, we found the impact of exchange rate volatility on the FDI is significantly negative. We also found FDI level decreases after the announcement of SFAS 35. All empirical results are consistent with the prediction of hypotheses in this study.
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Yang, Lan-jie, and 楊嵐傑. "The Performance of Hedging Strategies - The Evidence of Shorting USD against TWD Foreign Exchange Options." Thesis, 2004. http://ndltd.ncl.edu.tw/handle/06932382869669388770.
Full textAbstract:
碩士東吳大學
經濟學系
92
Taiwan is a foreign-trade-orientated country. In Taiwan, kinds of foreign trade activities are correlated with the volatile foreign exchange rate. The domestic exporters and importers can operate various financial instruments, such as USD/TWD foreign exchange option since 1997 deregulation. However, there are few papers discuss with this type of financial products and much less hedging strategies of foreign exchange options in Taiwan. Therefore, this study focuses on the performance of hedging strategies, as exporters and importers operate foreign exchanging activities. This study investigates exporters and importers use hedging strategies -- Un-hedge、Stop-Loss、Delta Hedge -- to avoid the potential risks if they sell FX options. Through actual data, this study examines the profit & loss of each hedging strategy, and compares its performance. According the hedging performance, it can be figured out which strategy is better than others. Following main findings are reached through the examining of each strategy’s hedging profit & loss: 1. The Stop-Loss strategy is better than Un-hedge and Delta Hedge on the whole. 2. The Delta Hedge strategy is better than Un-hedge and Stop-Loss, if and only if options are in-the-money on expiration date. 3. The Un-hedge strategy is better than Stop-Loss and Delta Hedge, if and only if options are out-of-the-money on expiration date.
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"The use of Eurodollar futures and options in short term asset/liability management." Chinese University of Hong Kong, 1990. http://library.cuhk.edu.hk/record=b5886375.
Full textAbstract:
by Mok Man-fai, Mansfield.Thesis (M.B.A.)--Chinese University of Hong Kong, 1990.
Bibliography: leaves 49-50.
ABSTRACT --- p.i
ACKNOWLEDGEMENT --- p.ii
TABLE OF CONTENTS --- p.iii
Chapter
Chapter I. --- INTRODUCTION --- p.1
Chapter II. --- EURODOLLAR FUTURES AND OPTIONS --- p.3
Eurodollar Futures --- p.3
Hedging With Eurodollar Futures --- p.4
Options On Eurodollar Futures --- p.5
Contract Type --- p.5
Contract Style --- p.6
Contract Lifespan --- p.6
Contract Value --- p.6
Hedging With Eurodollar Options --- p.7
Naked Positions --- p.7
Chapter III. --- ASSET/LIABILITY MANAGEMENT --- p.9
Gap Concept --- p.10
Gap Analysis --- p.11
Types of Gaps --- p.12
Positive And Negative Gaps --- p.13
Voluntary And Involuntary Gaps --- p.13
Chapter IV. --- HEDGING THE GAP --- p.14
Macro Hedge --- p.14
Micro Hedge --- p.17
Macro Hedge vs Micro Hedge --- p.17
Chapter V. --- HEDGING METHODOLOGY --- p.19
Cross Hedge Basis Risk --- p.20
Hedge Ratio --- p.20
Time Basis Risk . . --- p.21
Basic Hedge With No Time Basis Risk --- p.23
Example 1: Single 90-Day Gap --- p.24
Example 2: Single 30-Day Gap --- p.24
Example 3: Single 180-Day Gap --- p.25
Example 4: Series of 90-day gaps --- p.25
Example 5: Series of 30-Day Gaps --- p.26
Basic Hedge With Time Basis Risk --- p.27
Hedging Of A Series Of Liability Issues --- p.32
Strip hedge --- p.32
Stack hedge --- p.33
Chapter VI. --- OPTIONS AND FUTURES --- p.35
Similarities and Differences --- p.35
Merits And Demerits --- p.37
Chapter VII. --- REASONS FOR HEDGING --- p.39
Merits --- p.39
Demerits --- p.40
Chapter VIII. --- THE SITUATION IN HONG KONG --- p.42
Chapter IX. --- CONCLUSION --- p.45
APPENDIX --- p.47
BIBLIOGRAPHY --- p.49
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Soopal, D. C. "An evaluation of the use of currency options as an alternative hedging strategy to forward exchange contracts for the management of foreign exchange risk in a multinational firm." 2006. http://hdl.handle.net/10413/1660.
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Currency exposure has become a widespread issue as more corporations of all sizes source and sell in overseas markets and compete both at home and abroad with international companies. Very few companies are unaffected by currency risk, whether directly or indirectly. Businesses that source products from foreign countries face the risk that exchange rate movement will erode gross margins if competition prevents selling prices from rising in tandem, while resource-based companies face the uncertainty associated with the fact that the world's commodities markets are denominated in US Dollars or Pounds Sterling while their costs are often denominated in their local currencies. Businesses that ignore exchange rate volatility expose themselves to unnecessary risk, which could have significant consequences if exchange rates suddenly move unfavourably. The volatility of the South African Rand over the past few years is forcing treasurers and other managers responsible for international trade to look anew at how South African exchange rate fluctuations affect their company's results. Many companies have suffered from the effects of fluctuating exchange rates; some have reported losses running into millions of Rand. While more and more firms realize that they should manage foreign exchange risk, not all of them have come up with an appropriate management strategy. There has always been a great deal of debate over the best approach to hedging, or the best methods to forecast exchange rates; however hedging is of the utmost importance for companies. With the recent volatility of the rand, the multinational firm covered in this thesis, showed foreign exchange losses amounting to several millions, using forward exchange contracts to cover its high foreign exchange exposures. The major disadvantage of the forward contract as experienced by the firm and shown in this thesis is that it is a legally binding agreement and thus the firm was bound to accept the agreed exchange rate and also the fact that the exchange itself had to be done. If the commercial reason for the exchange disappeared, the cost of cancelling the forward contract would be quite high. In addition, if the exchange rate at maturity was more favourable to the firm than the one agreed to in the forward contract, the firm will still have to honour the contract and will not be able to take advantage of the favourable exchange rate. Thus, with FEC there is the elimination of the opportunity for profit, should exchange rates turn out favourably. When purchasing a currency option, however, the holder is protected from downward movements in the exchange rate whist still having the opportunity to benefit if the currency moves favourably. Hence, the purpose of this thesis was to evaluate the use of currency options as an alternative hedging strategy to forward exchange contracts to manage the firm's foreign exchange risk. It was found that, had the firm used currency options as compared to FEC over the last four years, the firm would have made significant saving in spite of the option premium. The firm would have enjoyed the flexibility offered by currency options, that is, to let the contract lapse when it would not be to the firm's advantage thus making a lower payment for its imports than would be paid under the forward exchange contract for the same period. The results were tested over a period of four years to prove that the difference in payments using the FEC and the currency options were statistically significant. What was apparent from the research, however, was that though the multinational firm could choose from a vast array of financial instruments and currency derivatives to manage its foreign exchange risk, the firm chose to stick to using forward exchange contracts. The reasons varied from fear of dealing with the complexities of the many instruments available on the market to the limited resources within the foreign exchange department to understand the technicalities of the various instruments. The investigation revealed though forward cover as used by the firm was more efficient in terms of ease of use. Currency options when applied to cover the firm's foreign imports resulted in less cash outflow, making it better and more profitable than forward exchange contracts. Options contract, though more expensive, would have allowed the firms to let the option lapse and therefore benefit from spot exchange rates if these were more favourable.Thesis (M.B.A.)-University of KwaZulu-Natal, Pietermaritzburg, 2006.
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"Cointegration pairs trading strategy on derivatives." 2013. http://library.cuhk.edu.hk/record=b5549271.
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在現今的社會，協整技術已被廣泛應用於金融和計量經濟領域，特別用於構建股票市場的統計套利策略。在這一篇論文中，我們主要考察在衍生品市場中，基於協整技術的套利交易策略，這一策略的主要研究對象是隱含波動率。利用隱性波動率的線性組合的均值回歸的特性，通過配對兩隻帶有正利差(如theta) 的短期平價歐式跨式期權來獲利。同時，構建實際波動率的模型和預測未來實際波動率的模型將會用於補充這一交易策略的不足，隱性一實際條件和Gamma-Vega條件被引入來提高交易策略的效率。這一策略的績效分析是基於三年的歷史外匯期權數據。從實證數據中，基於協整技術的策略能賺取利潤，而且Vega在利潤中起著重要的作用，並且無論是隱性一實際條件還是Gamma-Vega條件都是有效的。The notion of cointegration has been widely used in finance and econometrics, in particular in constructing statistical arbitrage strategies in the stock market. In this thesis, an arbitrage trading strategy for derivatives based on cointegration is studied to account for the volatility factor. Pairs of short dated at-the-money straddles of European options with positive net carry (i.e. theta) are used to capture the mean-reverting property of the linear combinations of implied volatilities. Furthermore, modeling and forecasting realized volatility are also considered as a supplement to the trading strategy. Implied-Realized Criertion and Gamma-Vega Criterion are introduced to improve the trading strategy. A performance analysis is conducted with a 3-year historical data of Foreign Exchange Options. From the empirical results, the portfolio based on the cointegration strategy makes a profit, where Vega plays a dominant role, and either the Implied-Realized Criertion or the Gamma-Vega Criterion is effective.
Detailed summary in vernacular field only.
Pun, Lai Fan.
Thesis (M.Phil.)--Chinese University of Hong Kong, 2013.
Includes bibliographical references (leaves 43-45).
Abstracts also in Chinese.
List of Tables --- p.v
List of Figures --- p.vi
Chapter 1 --- Introduction --- p.1
Chapter 2 --- Basic Ideas --- p.4
Chapter 2.1 --- Cointegration and Johansen’s Methodology --- p.4
Chapter 2.1.1 --- Cointegration --- p.4
Chapter 2.1.2 --- Johansen’s Methodology --- p.5
Chapter 2.2 --- Cointegration Pairs Trading Strategy --- p.6
Chapter 2.3 --- Modelling and Forecasting Realized Volatility --- p.8
Chapter 3 --- Cointegration Pairs Trading Strategy On Derivatives --- p.10
Chapter 3.1 --- Trading On Implied Volatility --- p.10
Chapter 3.2 --- Cointegration Trading Strategy --- p.12
Chapter 3.3 --- Greek Letters --- p.13
Chapter 3.3.1 --- Requirements of the Trade --- p.13
Chapter 3.3.2 --- Approximation of the Expected P/L --- p.15
Chapter 3.4 --- Foreign Exchange Options --- p.18
Chapter 3.4.1 --- Cointegration Pairs --- p.19
Chapter 3.4.2 --- Trading Process --- p.21
Chapter 3.4.3 --- More Examples --- p.22
Chapter 4 --- Further Trading Strategies --- p.26
Chapter 4.1 --- Estimation of Realized Volatility --- p.26
Chapter 4.2 --- Implied-Realized Criterion --- p.27
Chapter 4.3 --- Gamma-Vega Criterion --- p.29
Chapter 4.4 --- Summary --- p.32
Chapter 5 --- Conclusion and Further Discussion --- p.37
A --- p.39
B --- p.41
Bibliography --- p.43
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Lin, Chia Hua, and 林佳樺. "A study of foreign exchange risk hedging with barrier options: The cases of Formosa Plastics Marine and Chunghwa Telecom." Thesis, 2010. http://ndltd.ncl.edu.tw/handle/12365357966238485946.
Full textAbstract:
碩士長庚大學
工商管理學系
98
This study investigates foreign exchange risk hedging with barrier options from the cases of Formosa Group and Chunghwa Telecom to examine the rationality of the hedging contract and the theoretical value of the options. The banks provide foreign risk hedging policy to the companies by buying one knock-out barrier call option and selling one put option. Combine these two options as a zero cost option to make the hedging cost of the companies could be lower. After we calculate the theoretical value of the options, we find out that the value of knock-out barrier call option and put option are not equal. Also, though the sensitivity analysis, we find out that when the volatility becomes bigger, the hedging policy of zero options usually benefit for the banks, detrimental for the companies. Also, we find out the hedging policy should be easier. Once the designs of the hedging contracts are too complex, it’s not easy for companies to calculate out the theoretical price of the option. This would make the companies to buy a derivatives product that would let the companies fall into unlimited risks. Therefore, when companies decide to hedge, they should know the contents of the contract well, and calculate the theoretical price of the option to determine the hedging policy is reasonable or not.
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"Stochastic skew in interest rate cap and currency option markets." Thesis, 2011. http://library.cuhk.edu.hk/record=b6075456.
Full textAbstract:
This thesis considers the effect of stochastic skew in the interest rate cap and currency option markets, where we observe obvious stochastic variation of skew of implied volatility curve over time. To develop option pricing models consistent with empirical evidence, we adopt the Wishart process to model both stochastic volatility and stochastic skew of the asset return and to price options in both markets. As an affine model, the model is analytically tractable. Some distributional properties of the models are studied. The key feature of our model is that, when compared with the multi-factor Heston model, which generates stochastic skew through its volatility processes, the Wishart process contains not only volatility processes, but also volatility-unrelated processes which provide extra freedom to model the variation of skew that is not captured by the volatility processes. Numerical experiments demonstrate that the Wishart model has greater flexibility to model stochastic skew than the multi-factor Heston model in both the interest rate cap market and currency option market. Finally, results of calibration to market data and model estimation demonstrate the superiority of the Wishart model to the multi-factor Heston model in the interest rate cap market.Ng, Hon Yip.
Advisers: Kwai-Sun Leung; Duan Li.
Source: Dissertation Abstracts International, Volume: 73-09(E), Section: A.
Thesis (Ph.D.)--Chinese University of Hong Kong, 2011.
Includes bibliographical references (leaves 89-98).
Electronic reproduction. Hong Kong : Chinese University of Hong Kong, [2012] System requirements: Adobe Acrobat Reader. Available via World Wide Web.
Electronic reproduction. Ann Arbor, MI : ProQuest dissertations and theses, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web.
Abstract also in Chinese.
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Ghalbouni, Joseph P. "Essays in option pricing and foreign exchange rate determination." Thesis, 1989. http://spectrum.library.concordia.ca/3178/1/NL51326.pdf.
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Chen, Gon-Shin, and 陳國信. "Design the Trading System of Foreign Exchange Rate Option." Thesis, 1998. http://ndltd.ncl.edu.tw/handle/56941653602259393738.
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Chen, Shih-kung, and 陳世恭. "Foreign Exchange Option Trading Practices, Hedging Strategy and Application." Thesis, 2014. http://ndltd.ncl.edu.tw/handle/00732304357145702072.
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碩士國立高雄第一科技大學
金融研究所
102
Foreign exchange options is now more and more widely used in the foreign exchange market operations, and whilst continuing to introduce new products, target redemption forward contracts is one of the examples. However because of foreign exchange options trading exchange risk is much greater than traditional hedging method, so to engage in this transaction, should have more professional and practical knowledge; this paper discusses the basis for the trading practices, a common description of the foreign exchange options trading patterns, and the industry commonly used to avoid insurance policy, and further adjusted by the parameter settings and methods to derive four zero cost portfolio transactions, and then advanced strategies derived from the application view to taking into account hedging customized to meet the needs and enhance the financial sector''s revenue and market share rate of win-win situation.
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Guan, Ya-Li, and 關雅莉. "The Effectiveness of Foreign Exchange Option on Enterprise 's Hedging." Thesis, 2017. http://ndltd.ncl.edu.tw/handle/kh9bdm.
Full textAbstract:
碩士亞洲大學
經營管理學系碩士在職專班
105
In the competitive business down, materials, wages, exchange rates for the company is a very important part of the exchange rate can affect the company's profit and loss, the direction of the financial side of the exchange rate needs to be very clear, often may bring losses, Benefit, in the end dangerous or opportunity, but also test the financial management of corporate financial management and exchange rate risk management capabilities. Financial markets are drastically changing in the market, shocks in the market, face all kinds of external changes, even the central bank president Peng Huainan once said, "NT is lit or demoted, no one knows." No one can accurately predict the market. For business, business units have orders, and generally as long as the smooth exchange rate of the majority of manufacturers rarely hedge, wait until the big fluctuations, the hedge has been too slow. If you can do a good job of hedging will effectively lock the gross margin, you can stabilize the advantages of the expected profit, so that enterprises sound business. Nowadays, the world economy is becoming more and more integrated. Business is becoming more and more developed. The flow of capital between countries and countries is becoming more and more frequent. Enterprises often use transnational operation to enhance their own strength and expand their business areas for enterprises. The establishment of overseas companies to help enterprises to the world, to carry out cross-border business, enhance the international image of enterprises. The use of foreign companies OBU (OFF-SHORE COMPANY) planning hedge "exchange risk" has become a financial professional operation. Foreign-funded enterprises through the bank Taiwan OBU can trades the foreign exchange derivative financial market, in the market more companies use the project, divided into foreign exchange options trading, cash transactions, forward foreign exchange transactions, the target redeemable forward contracts Four, now from these four to be discussed: 1. The spot exchange rate --- spot payment is the bank to buy (for) the price of foreign currency, expiring directly to the then exchange rate, and did not do hedging function, (the worst) 2. Foreign exchange options ---- effective hedging effect, on the one hand can reduce the cost of hedging, although the expected error, but also reduce the risk of hedging errors, play a hedge function. (Can choose to perform or give up the adjustment space) 3. Forward foreign exchange --- forward foreign exchange expires, the two sides agreed in the future on a specific date or period (after the two business days above the trading day), according to the agreed exchange rate, currency transactions. (Irrespective of exchange rate movements, still need to be implemented). 4. Target redeemable forward contract (TRF) ---- guests and banks to buy an option to sell a two-year option, the Taiwan Bank to sell RMB-based TRF products. Pay attention to the exchange rate in the take a single trend, the next direction to the yuan, the profit is limited! But the order back to the direction, the loss of the original price difference and then multiplied by the amount of the outer bar to defend the rain times. TRF regardless of the direction of the right or wrong must wait until the contract expires to end.
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Hwang, Jun-Jay, and 黃俊傑. "The Optimal Hedge Timing of Foreign Exchange-A Real option Analysis Application." Thesis, 2007. http://ndltd.ncl.edu.tw/handle/26206346312637161056.
Full textAbstract:
碩士逢甲大學
財務金融學所
95
The volatility of foreign exchange often decides the magnitude of revenue to the export/import companies. Existing literatures mostly focus on foreign exchange prediction, the risk of foreign exchange and the pricing issues but ignore the problem of optimal hedge timing. Reviewing the existing references, there is only option-based analysis technique is able to take investment/hedging uncertainty/ risk into account. More clearly, there is only the real option analysis (ROA) is able to provide the optimal trigger timing result to analyst. This study intends to pioneer employing ROA to create the optimal hedge timing to foreign exchange. Upon this study has been completed, a numerical analysis to analyse the different influences under the different hedging cost of foreign exchange hedging instrument, a different foreign exchange volatility, and different interest rate will be conducted. This numerical analysis is able to verify the accuracy of developing model with financial theory.
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CHANG, CHEN-TAI, and 張岑黛. "THE IMPACT OF FOREIGN EXCHANGE VOLATILITY ON THE PRICE FORMING OF CURRENCY OPTION." Thesis, 1997. http://ndltd.ncl.edu.tw/handle/20139464904942579258.
Full textAbstract:
碩士長庚醫學暨工程學院
管理科學系
85
The Central Bank of China has already announced that Taiwan foreign exchange option is allowed to trade in market since May 1997. Definitely, thiswill be another efficient alternative tool for companies and investors to hedge and to arbitrage in foreign exchange market. Data come from Deutsche Mark (DM) and Japanese Yen (JY) currency option data of Philadelphia Stock Exchange (PHLX). The main purpose of this thesis is to predict and to test the difference between market price and theory price, based on European Currency Option Pricing Model of Biger & Hull(1983)*s. Regression analysis and the rate of disparity analysis are employed to test the best volatility estimations. The research is divided into two stages. The first stage is test period from January 1, 1995 to December 31, 1995.The second stage is predict period from January 1, 1996 to December 31,1996.According to Biger & Hull(1983)*s currency option pricing theory, we know that those five main variables can be acquired from market except volatility. In this paper, 30-days moving average standard deviation, weighted implied volatility( WISD), autoregressive conditional heteroscedastic(ARCH), and Generalized ARCH(GARCH) are employed to estimate the foreign exchange volatility.The conclusions are in the following,1. According to regression analysis, the best volatility estimation methods are 30-days moving average standard deviation and WISD. But the rate of disparity analysis shows that WISD is more accurate than 30- days moving average standard deviation. 2. Both test stage and predict stage show that it is more suitable to use Biger & Hull currency option pricing model in DM currency option than in JY currency option. 3. Call option is more accurate than put option. 4. The predict stage is better than test stage. This is because the volatility of foreign exchange of 1996 is smaller than the volatility of 1995.
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Chen, Ya-Chih, and 陳雅芝. "Model-Free Implied Volatility and Its Information Content—Evidence from Foreign Exchange Option." Thesis, 2013. http://ndltd.ncl.edu.tw/handle/76596917798457185898.
Full textAbstract:
碩士國立臺灣大學
財務金融學研究所
101
In this article, we follow Jiang and Tian (2005) to calculate the model-free implied volatility of foreign exchange options traded in the OTC market and the underlying assets are EUR/USD, GBP/USD and USD/JPY. In the first part, we calculate the model-free implied volatility and realized volatility constructed by intraday high-frequency data. In the second part, we compare the information content between model-free implied volatility, Black-Scholes (B-S) at-the-money implied volatility and historical volatility. The univariate regression results show that all of the three volatilities have significant predictability for future realized volatility, and the encompassing regression results show that the two implied volatilities contain more information than the historical volatility. Then, we compare the information between the model-free implied volatility and the B-S implied volatility. Although the results in Jiang and Tian (2005) suggest that the model-free implied volatility is a more efficient forecast for future realized volatility, our results get an overall conclusion that the model-free implied volatility does not predict future volatility better than the B-S implied volatility. We conjecture that there are only at most 9 quotes in the currency options market per day while there are much more quotes in equity option market per day. Since the model-free implied volatility is constructed from all of the market data, the limited available of market data leads to the result that it cannot have better predictability than the B-S implied volatility.
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Lee, Ying-Chu, and 李盈助. "Value at Risk and Distribution of a Foreigh Exchange Option: The Case of DM Call." Thesis, 2000. http://ndltd.ncl.edu.tw/handle/37902392896528878051.
Full textAbstract:
碩士輔仁大學
金融研究所
88
Abstract Graduate Institute of Finance Fujen Catholic University Name：Ying-Chu Lee Month/Year：July,2000 Adviser：Nen-Jing Chen, PH.D Value at Risk and Distribution of a Foreign Exchange Option: The Case of DM Call Value at Risk is an emerging tool of risk management. Compared to traditional capital adequacy or gap management, VaR is a better tool of dynamic risk management and for its ability in quantifing risk. This research focuses on the Foreigh Exchange Option--DM Call and tries to compare VaR''s estimation and forecast performance of different VaR models. The models include Cornish-fisher method, distribution method and historical method. The performance of VaR estimation methods were evaluated by forward test and the average of percentage of absolute error. The conclusion of the research were as follows: 1. For long position of a call, historical method is better than both Cornish-fisher method and distribution method by both measurement of per-formance. 2. For short position of a call, the performance of both historical method and Cornish-fisher method is very close. They are better than distribution method. 3. In the forward test, for both long and short position of calls, the smaller α,the fewer outliers. 4. The poor performance of distribution method may be resulted from assumptions made in the derivation of the distribution and discretion of the empirical price series.