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Journal articles on the topic 'Foreign exchange options'

Author: Grafiati

Published: 4 June 2021

Last updated: 2 March 2023

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1

Borensztein, Eduardo R., and Michael P. Dooley. "Options on Foreign Exchange and Exchange Rate Expectations." Staff Papers - International Monetary Fund 34, no. 4 (December 1987): 643. http://dx.doi.org/10.2307/3867193.

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2

PELLEGRINO, TOMMASO. "SECOND-ORDER STOCHASTIC VOLATILITY ASYMPTOTICS AND THE PRICING OF FOREIGN EXCHANGE DERIVATIVES." International Journal of Theoretical and Applied Finance 23, no. 03 (May 2020): 2050021. http://dx.doi.org/10.1142/s0219024920500211.

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We consider models for the pricing of foreign exchange derivatives, where the underlying asset volatility as well as the one for the foreign exchange rate are stochastic. Under this framework, singular perturbation methods have been used to derive first-order approximations for European option prices. In this paper, based on a previous result for the calibration and pricing of single underlying options, we derive the second-order approximation pricing formula in the two-dimensional case and we apply it to the pricing of foreign exchange options.

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3

Brenner, Menachem, Young Ho Eom, and Yoram Landskroner. "Implied foreign exchange rates using options prices." International Review of Financial Analysis 5, no. 3 (1996): 171–83. http://dx.doi.org/10.1016/s1057-5219(96)90012-5.

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4

Berg, Menachem, and Giora Moore. "Foreign Exchange Strategies: Spot, Forward and Options." Journal of Business Finance & Accounting 18, no. 3 (April 1991): 449–57. http://dx.doi.org/10.1111/j.1468-5957.1991.tb00606.x.

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5

Liu, Qinyu, Ting Jin, Min Zhu, Chenlei Tian, Fuzhen Li, and Depeng Jiang. "Uncertain Currency Option Pricing Based on the Fractional Differential Equation in the Caputo Sense." Fractal and Fractional 6, no. 8 (July 24, 2022): 407. http://dx.doi.org/10.3390/fractalfract6080407.

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The foreign exchange market comprises the largest global volume, so the pricing of foreign exchange options has always been a hot issue in the foreign exchange market. This paper treats the exchange rate as an uncertain process that is described by an uncertain fractional differential equation, and establishes a new uncertain fractional currency model. The uncertain process is driven by Liu process, and, with the application of the Mittag-Leffler function, the solution of the fractional differential equation in a Caputo sense is presented. Then, according to the uncertain fractional currency model, the pricing formulas of European and American currency options are given. Lastly, the two numerical examples of European and American currency options are given; the price of the currency option increased when p changed from 1.0 to 1.1, and prices with different p were all decreasing functions of exercise price K.

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6

Kung, James J. "A Continuous-Time Model for Valuing Foreign Exchange Options." Abstract and Applied Analysis 2013 (2013): 1–10. http://dx.doi.org/10.1155/2013/635746.

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This paper makes use of stochastic calculus to develop a continuous-time model for valuing European options on foreign exchange (FX) when both domestic and foreign spot rates follow a generalized Wiener process. Using the dollar/euro exchange rate as input for parameter estimation and employing our FX option model as a yardstick, we find that the traditional Garman-Kohlhagen FX option model, which assumes constant spot rates, values incorrectly calls and puts for different values of the ratio of exchange rate to exercise price. Specifically, it undervalues calls when the ratio is between 0.70 and 1.08, and it overvalues calls when the ratio is between 1.18 and 1.30, whereas it overvalues puts when the ratio is between 0.70 and 0.82, and it undervalues puts when the ratio is between 0.86 and 1.30.

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7

Ahlip, Rehez, Laurence A. F. Park, and Ante Prodan. "Pricing currency options in the Heston/CIR double exponential jump-diffusion model." International Journal of Financial Engineering 04, no. 01 (March 2017): 1750013. http://dx.doi.org/10.1142/s242478631750013x.

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We examine currency options in the double exponential jump-diffusion version of the Heston stochastic volatility model for the exchange rate. We assume, in addition, that the domestic and foreign stochastic interest rates are governed by the CIR dynamics. The instantaneous volatility is correlated with the dynamics of the exchange rate return, whereas the domestic and foreign short-term rates are assumed to be independent of the dynamics of the exchange rate and its volatility. The main result furnishes a semi-analytical formula for the price of the European currency call option in the hybrid foreign exchange/interest rates model.

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8

CHARLEBOIS, MAXIME, and STEPHEN SAPP. "Temporal Patterns in Foreign Exchange Returns and Options." Journal of Money, Credit and Banking 39, no. 2-3 (March 2007): 443–70. http://dx.doi.org/10.1111/j.0022-2879.2007.00032.x.

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9

Ahlip, Rehez, and Ante Prodan. "Pricing FX Options in the Heston/CIR Jump-Diffusion Model with Log-Normal and Log-Uniform Jump Amplitudes." International Journal of Stochastic Analysis 2015 (July 26, 2015): 1–15. http://dx.doi.org/10.1155/2015/258217.

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We examine foreign exchange options in the jump-diffusion version of the Heston stochastic volatility model for the exchange rate with log-normal jump amplitudes and the volatility model with log-uniformly distributed jump amplitudes. We assume that the domestic and foreign stochastic interest rates are governed by the CIR dynamics. The instantaneous volatility is correlated with the dynamics of the exchange rate return, whereas the domestic and foreign short-term rates are assumed to be independent of the dynamics of the exchange rate and its volatility. The main result furnishes a semianalytical formula for the price of the foreign exchange European call option.

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10

Hoque, Ariful, Thi Ngoc Quynh Le, and Kamrul Hassan. "Does currency smirk predict foreign exchange return?" Investment Management and Financial Innovations 17, no. 3 (September 23, 2020): 219–30. http://dx.doi.org/10.21511/imfi.17(3).2020.17.

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This study examines the predictive power of implied volatility smirk to forecast foreign exchange (FX) return. The volatility smirk contains critical information, especially when the market experiences negative news. The Australian dollar, Canadian dollar, Swiss franc, Euro, and British pound options traded in the opening, midday and closing periods of the trading day are selected to estimate the currency smirk. Research results reveal that the currency smirk outperforms in forecasting FX returns. In addition, the steeper slope in the middle of the trading day suggests that the predictive power of currency smirk in the midday period is higher compared to the opening and closing periods. However, currency smirks’ predictability lasts for a short period, as the FX market is highly adept at incorporating the vital information embedded in the currency smirk. These findings imply that the currency smirk is distinctive for forecasting very short-term FX fluctuations, and the day- or overnight FX traders can use its uniqueness to profit from quick price swings in the 24-hour global FX market.

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11

Ernazarov, Normet Saparboyevich, and Oybek Odilovich Xudoyorov. "Important Aspects Related To Foreign Exchange Operations Of Commercial Banks." American Journal of Applied sciences 03, no. 04 (April 30, 2021): 157–65. http://dx.doi.org/10.37547/tajas/volume03issue04-22.

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This article provides analytical, critical and econometric analysis of the factors influencing the off-balance sheet operations of commercial banks of the Republic of Uzbekistan. Factors influencing documentary letters of credit, currency forward transactions, bank guarantee-related transactions, currency spot, currency futures and options from off-balance sheet operations, which are highly profitable for commercial banks, were studied.

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12

CUTHBERTSON, CHARLES, GRIGORIOS PAVLIOTIS, AVRAAM RAFAILIDIS, and PETTER WIBERG. "ASYMPTOTIC ANALYSIS FOR FOREIGN EXCHANGE DERIVATIVES WITH STOCHASTIC VOLATILITY." International Journal of Theoretical and Applied Finance 13, no. 07 (November 2010): 1131–47. http://dx.doi.org/10.1142/s0219024910006145.

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We consider models for the valuation of derivative securities that depend on foreign exchange rates. We derive partial differential equations for option prices in an arbitrage-free market with stochastic volatility. By use of standard techniques, and under the assumption of fast mean reversion for the volatility, these equations can be solved asymptotically. The analysis goes further to consider specific examples for a number of options, and to a considerable degree of complexity.

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13

KWOK, YUE-KUEN, and HOI-YING WONG. "CURRENCY-TRANSLATED FOREIGN EQUITY OPTIONS WITH PATH DEPENDENT FEATURES AND THEIR MULTI-ASSET EXTENSIONS." International Journal of Theoretical and Applied Finance 03, no. 02 (April 2000): 257–78. http://dx.doi.org/10.1142/s0219024900000127.

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Currency-translated foreign equity options (quanto options) are designed for investors who would like to manage different types of risk in international equity investments. The terminal payoffs of quanto options depend on the price of a foreign currency denominated asset (or stock index) and the exchange rate in different combinations of choices. This paper presents a systematic framework to derive pricing formulas for different European-style quanto options with path-dependent payoff functions. The path dependent features can be the barrier feature associated with the underlying asset price movement, the averaging feature of the exchange rate over the life of the option, etc. In many cases, the pricing formulas for quanto options can be inferred from their vanilla counterparts by applying the quanto-prewashing technique of making modifications on the risk neutralized drift rates and volatility rates. The extension of the pricing formulations to multi-asset extremum options with the quanto feature is also considered. The pricing behaviors of the joint quanto options and the Asian quanto options are examined.

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14

Jimenez-Gomez, Miguel, Natalia Acevedo-Prins, and Erick Lambis-Alandete. "Simulation of Exchange Hedges with Financial Options to Mitigate Foreign Exchange Risk." Journal of Engineering and Applied Sciences 14, no. 6 (December 31, 2019): 1749–54. http://dx.doi.org/10.36478/jeasci.2019.1749.1754.

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15

Shin, Dong-Hoon, Seonhyeon Kim, Hojoon Kim, and Daehwi Jung. "Psychological Barrier in Foreign Exchange Rate and Implied Volatility in Currency Exchange Option." Journal of Derivatives and Quantitative Studies 22, no. 2 (May 31, 2014): 309–29. http://dx.doi.org/10.1108/jdqs-02-2014-b0006.

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In this paper, we examine the existence of the psychological barriers in three foreign exchange rate, won/dollar, euro/dollar, yen/dollar, and test that the psychological barriers effect to the implied volatilities of the FX options. For each exchange rate, the existence and spots of the psychological barriers are estimated from roughly 10 years data for each currency rate, and GARCH (1, 1) model was applied to observe the momentum effect about the mean and variance of the conditional returns, and the implied volatility of the FX-options for each currency rate near the psychological barriers. Since this effect is more clearly observed on the implied volatility data, this fact supports that psychological barriers affects to the price of the FX-options.

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16

Puri, Tribhuvan N., George C. Philippatos, and Dosoung Choi. "PRICING OF FOREIGN EXCHANGE FORWARD, FUTURES AND OPTIONS CONTRACTS." Financial Review 22, no. 3 (August 1987): 101. http://dx.doi.org/10.1111/j.1540-6288.1987.tb01235.x.

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17

Christoffersen, P. "The Accuracy of Density Forecasts from Foreign Exchange Options." Journal of Financial Econometrics 3, no. 4 (August 19, 2005): 578–605. http://dx.doi.org/10.1093/jjfinec/nbi021.

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18

Saito, Taiga. "Pricing Foreign Exchange Options Under Intervention by Absorption Modeling." Asia-Pacific Financial Markets 23, no. 1 (February 8, 2016): 85–106. http://dx.doi.org/10.1007/s10690-016-9210-1.

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19

Chu, Ting-Heng, and Steve Swidler. "Forecasting Emerging Market Exchange Rates from Foreign Equity Options." Journal of Financial Research 25, no. 3 (September 2002): 353–66. http://dx.doi.org/10.1111/1475-6803.00023.

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20

Kokin, Alexander S. Kokin, Vladimir A. Odinokov Odinokov, and Valentina N. Shchepetova Shchepetova. "Analysis of the development of the foreign exchange market in the Russian Federation." Russian Journal of Water Transport, no. 69 (December 20, 2021): 149–61. http://dx.doi.org/10.37890/jwt.vi69.222.

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The article focuses on the financial foreign exchange market, the development and condition of which determines the financial well-being of most commercial enterprises of the Russian Federation. The purpose of the research is to give review of the Russian foreign exchange market’ development and situation. The main factors influencing the level of the exchange rate of foreign currencies expressed in national currency are considered. The domestic and international foreign exchange market of Russia for the period 2016-2020 is analyzed. The dynamics of conversion operations, the structure of participants in the domestic foreign exchange market by type of currency. The results of trading on the foreign exchange market, futures and options as a currency instrument, the share of options and futures on the futures market of the Russian Federation, as well as the dynamics of the US dollar against the ruble and exchange trading indicators for the period from 2016 to 2020. The conditions, results and prospects of the development of the financial foreign exchange market of the Russian Federation are discussed in this article

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21

AHLIP, REHEZ. "FOREIGN EXCHANGE OPTIONS UNDER STOCHASTIC VOLATILITY AND STOCHASTIC INTEREST RATES." International Journal of Theoretical and Applied Finance 11, no. 03 (May 2008): 277–94. http://dx.doi.org/10.1142/s0219024908004804.

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In this paper, we present a stochastic volatility model with stochastic interest rates in a Foreign Exchange (FX) setting. The instantaneous volatility follows a mean-reverting Ornstein–Uhlenbeck process and is correlated with the exchange rate. The domestic and foreign interest rates are modeled by mean-reverting Ornstein–Uhlenbeck processes. The main result is an analytic formula for the price of a European call on the exchange rate. It is derived using martingale methods in arbitrage pricing of contingent claims and Fourier inversion techniques.

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22

Bhat, Aparna, and Kirti Arekar. "Empirical Performance of Black-Scholes and GARCH Option Pricing Models during Turbulent Times: The Indian Evidence." International Journal of Economics and Finance 8, no. 3 (February 26, 2016): 123. http://dx.doi.org/10.5539/ijef.v8n3p123.

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Exchange-traded currency options are a recent innovation in the Indian financial market and their pricing is as yet unexplored. The objective of this research paper is to empirically compare the pricing performance of two well-known option pricing models – the Black-Scholes-Merton Option Pricing Model (BSM) and Duan’s NGARCH option pricing model – for pricing exchange-traded currency options on the US dollar-Indian rupee during a recent turbulent period. The BSM is known to systematically misprice options on the same underlying asset but with different strike prices and maturities resulting in the phenomenon of the ‘volatility smile’. This bias of the BSM results from its assumption of a constant volatility over the option’s life. The NGARCH option pricing model developed by Duan is an attempt to incorporate time-varying volatility in pricing options. It is a deterministic volatility model which has no closed-form solution and therefore requires numerical techniques for evaluation. In this paper we have compared the pricing performance and examined the pricing bias of both models during a recent period of volatility in the Indian foreign exchange market. Contrary to our expectations the pricing performance of the more sophisticated NGARCH pricing model is inferior to that of the relatively simple BSM model. However orthogonality tests demonstrate that the NGARCH model is free of the strike price and maturity biases associated with the BSM. We conclude that the deterministic BSM does a better job of pricing options than the more advanced time-varying volatility model based on GARCH.

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23

Loriot, Blake, Elaine Hutson, and Hue Hwa Au Yong. "Equity-linked executive compensation, hedging and foreign exchange exposure: Australian evidence." Australian Journal of Management 45, no. 1 (May 10, 2019): 72–93. http://dx.doi.org/10.1177/0312896219830158.

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Using a sample of 268 Australian firms over the period 2009–2014, we examine the relation between the equity-linked compensation (shares and options) of Australian executives – CEOs, CFOs and directors – and firms’ foreign exchange hedging programmes. We find that the greater the number of shares held by CEOs, the higher its exposure to exchange rate movements. While this suggests that remuneration in the form of shares has a critical downside, we also find evidence for a more positive and important role in foreign exchange risk management for the share- and option-related incentives provided to CFOs. JEL Classification: G32, G15, F31

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24

Kermiche, Lamya, and Philippe Dupuy. "Understanding Foreign Exchange Option Returns: The Information Content Of Volatility." Journal of Applied Business Research (JABR) 32, no. 2 (March 1, 2016): 439. http://dx.doi.org/10.19030/jabr.v32i2.9587.

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According to general asset pricing theory, options should reward their holders for the systematic risk they are bearing. In this paper, we study the returns of foreign exchange options. We find that, by sorting options according to the distance of their implied volatility from the historical volatility, we obtain portfolios with positive average monthly returns. These returns are not explained by standard aggregate risk factors, which suggest either that additional risk factors should be accounted for, or that investors behavior differs from the traditional paradigm of rational agents.

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25

Stevenson, John. "The value of millisecond expiry options in spot foreign exchange markets." Journal of Governance and Regulation 5, no. 4 (2016): 85–89. http://dx.doi.org/10.22495/jgr_v5_i4_p7.

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The spot foreign exchange marketplaces are split into two types by their respective trading rules: markets with conventional resting orders versus markets with resting that orders that include optionality. This optionality is owned by the counterparty who placed the resting order and provides the option to refuse the aggressive order matched against the resting order. This paper describes and contrasts these two types of markets. A valuation method for these very short expiry options on the later marketplace is proposed. Appropriate historical volatility metrics are defined and applied for these uniquely short expiry timescales. These historical volatility and valuation methods are used to describe some historical intraday periods, and are applied to various trading scenarios. Unique behaviors driven by the value of these options are highlighted. The benefits and risks of trading on these markets are described in light of this valuation approach. The effects of various addition constraints on the liquidity providers for these optionality matching marketplaces are introduced. Through judicious timing of order placement and appropriate constraints on the behaviors of the liquidity providers on these markets, the result is shown to be tighter spreads, greater breath and depth of liquidity, and the high fill ratios than the more conventional non-optionality matching markets.

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26

Xu, Xinzhong, and Stephen J. Taylor. "The Term Structure of Volatility Implied by Foreign Exchange Options." Journal of Financial and Quantitative Analysis 29, no. 1 (March 1994): 57. http://dx.doi.org/10.2307/2331190.

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27

Wolf, Avner, and Christopher Hessel. "Pricing Options on Foreign Currency with a Preset Exchange Rate." Journal of Mathematical Finance 02, no. 03 (2012): 214–24. http://dx.doi.org/10.4236/jmf.2012.23024.

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28

Campa, José Manuel, and P. H. Kevin Chang. "The forecasting ability of correlations implied in foreign exchange options." Journal of International Money and Finance 17, no. 6 (December 1998): 855–80. http://dx.doi.org/10.1016/s0261-5606(98)00031-x.

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29

Büttler, Hans-Jürg. "An expository note on the valuation of foreign exchange options." Journal of International Money and Finance 8, no. 2 (June 1989): 295–304. http://dx.doi.org/10.1016/0261-5606(89)90029-6.

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30

Nouajaa, Ghassen, and Jean-Laurent Viviani. "Residual foreign exchange risk: does CEO compensation matter?" Journal of Risk Finance 18, no. 5 (November 20, 2017): 581–600. http://dx.doi.org/10.1108/jrf-10-2016-0140.

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Purpose The purpose of this paper is to investigate whether CEO compensation scheme may induce some agency conflicts in the foreign exchange risk hedging policy. Design/methodology/approach Residual exposure is a post-hedging variable computed as the ratio of unrealized foreign exchange risk gains/losses to international sales. The authors follow the optimal hedging theory developed by Smith and Stulz (1985). The residual foreign exchange risk exposure is a way to capture some consequences of the managerial risk aversion, whereas the compensation scheme granted to CEO reveals that of the shareholders. The authors interpret any deviation to the predictions of this theory as a mark that some agency conflicts exist. Findings CEO compensation (stock-options, shares and so) significantly influence the level of the residual foreign exchange risk exposure. Both in-the-money exercisable options and shares are negatively related to the residual exposure of foreign exchange risk. The authors also document that the effect of agency problems is rather contingent because shares and options have especially a negative impact when the level of foreign exchange risk is relatively high. Originality/value The residual FX risk exposure variable the authors promote in this paper completes the traditional proxies used to depict the corporate hedging policy such as the nominal or total fair value of currency derivatives (Davies et al., 2006), use of nominal values (Spanò, 2007), use of fair values of derivatives and the fraction of production hedged (Wang and Fan, 2011). The information that it conveys differs significantly from the one provided by traditional proxies because it captures the year-end post hedging firm’s risk profile.

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31

SHEVCHENKO, PAVEL V. "HOLDER-EXTENDIBLE EUROPEAN OPTION: CORRECTIONS AND EXTENSIONS." ANZIAM Journal 56, no. 4 (April 2015): 359–72. http://dx.doi.org/10.1017/s1446181115000097.

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Financial contracts with options that allow the holder to extend the contract maturity by paying an additional fixed amount have found many applications in finance. Closed-form solutions for the price of these options have appeared in the literature for the case when the contract for the underlying asset follows a geometric Brownian motion with constant interest rate, volatility and nonnegative dividend yield. In this paper, option price is derived for the case of the underlying asset that follows a geometric Brownian motion with time-dependent drift and volatility, which is more important for real life applications. The option price formulae are derived for the case of a drift that includes nonnegative or negative dividend. The latter yields a solution type that is new to the literature. A negative dividend corresponds to a negative foreign interest rate for foreign exchange options, or storage costs for commodity options. It may also appear in pricing options with transaction costs or real options, where the drift is larger than the interest rate.

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32

XU, GUANGLI, SHIYU SONG, and YONGJIN WANG. "THE VALUATION OF OPTIONS ON FOREIGN EXCHANGE RATE IN A TARGET ZONE." International Journal of Theoretical and Applied Finance 19, no. 03 (April 21, 2016): 1650020. http://dx.doi.org/10.1142/s0219024916500205.

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This paper derives a simple model to analyze foreign exchange rate behavior under a target zone regime. From the real market data of exchange rate of US Dollar (USD) to Hong Kong Dollar (HKD) (USD/HKD), somewhat surprisingly, we find that some of the observations fall outside the stated range. Consequently, a so-called skew CIR model for this exchange rate which has a probability of exceeding the stated boundary is developed. A spectral expansion approach is used to analyze the model. The valuation of the barrier and the one-touch options for the derivative written on the exchange rate is studied in the end.

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33

Stuart, R. A., and P. A. Black. "External shocks, financial markets and the real economy: Policy options in South Africa." South African Journal of Economic and Management Sciences 3, no. 3 (September 30, 2000): 403–12. http://dx.doi.org/10.4102/sajems.v3i3.2619.

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The paper considers the transmission of an external shock through the bond, equity, money and foreign exchange markets and, depending on the nature and duration of the shock, the attendant effects on various sectors of the South African economy. While it is acknowledged that the ability of the Reserve Bank to intervene in the foreign exchange markets is limited, it is argued that the current policy may not be appropriate in the face of a sustained speculative attack. Instead, a policy of selective intervention aimed at the relative degrees of change in foreign exchange and interest rates may be used to affect the distribution of costs between various sectors of the economy.

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34

Boudt, Kris, Fang Liu, and Piet Sercu. "Exporters’ Exposures to Currencies: Beyond the Loglinear Model*." Review of Finance 20, no. 4 (August 13, 2015): 1631–57. http://dx.doi.org/10.1093/rof/rfv040.

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Abstract We extend the constant-elasticity regression that is the default choice when equities’ exposure to currencies is estimated. In a proper real-option-style model for the exporters’ equity exposure to the foreign exchange rate, we argue, the convexity of the relationship implies that the elasticity should depend on the exchange rate level. For instance, it should shrink to zero when the option to export becomes worthless, and that should happen at a critical exchange rate that is still strictly positive. We propose a class of tractable multi-regime regression models featuring, in line with the real-options logic, smooth transitions and within-regime dynamics in the foreign exchange exposure. We then analyze the exchange rate exposure of Chinese exporting firms and find that the model in which the moneyness of the export option has a positive impact on the exchange rate exposure detects a significantly positive and convex exposure for 40% and 65% of the firms depending on whether the market return is included in the regression or not.

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35

Gutierrez-Salazar, Manuela, Miguel Jiménez-Gómez, and Natalia Acevedo-Prins. "Evaluation of efficiency of hedging strategies with option portfolios for buyers of the currency US dollar/Colombian peso." IAES International Journal of Artificial Intelligence (IJ-AI) 11, no. 2 (June 1, 2022): 572. http://dx.doi.org/10.11591/ijai.v11.i2.pp572-581.

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This paper evaluates the efficiency to mitigate the exchange rate risk of nine hedging strategies with financial options. Strategies to hedging the purchase of US dollar Colombian peso (USDCOP) by importers in Colombia were raised. In this way, the traditional strategy with call options and eight strategies with investment portfolios were evaluated. These portfolios of options for hedge are offered by financial entities in Colombia. These nine hedged scenarios were compared with the unhedged scenario that corresponds to the foreign exchange risk exposure of importers. The USDCOP currencies were modeled with a mean reversion with jumps models, option premiums were valued with the black-scholes method and the best hedging strategy was determined through a Monte Carlo simulation. According to the results obtained, the nine hedging strategies manage to mitigate risk, but the most efficient was the option portfolio called collar.

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36

Abedi, Mohammad, and Daniel Bartolomeo. "Entropic Dynamics of Exchange Rates and Options." Entropy 21, no. 6 (June 13, 2019): 586. http://dx.doi.org/10.3390/e21060586.

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An Entropic Dynamics of exchange rates is laid down to model the dynamics of foreign exchange rates, FX, and European Options on FX. The main objective is to represent an alternative framework to model dynamics. Entropic inference is an inductive inference framework equipped with proper tools to handle situations where incomplete information is available. Entropic Dynamics is an application of entropic inference, which is equipped with the entropic notion of time to model dynamics. The scale invariance is a symmetry of the dynamics of exchange rates, which is manifested in our formalism. To make the formalism manifestly invariant under this symmetry, we arrive at choosing the logarithm of the exchange rate as the proper variable to model. By taking into account the relevant information about the exchange rates, we derive the Geometric Brownian Motion, GBM, of the exchange rate, which is manifestly invariant under the scale transformation. Securities should be valued such that there is no arbitrage opportunity. To this end, we derive a risk-neutral measure to value European Options on FX. The resulting model is the celebrated Garman–Kohlhagen model.

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37

권오상. "Central Bank’s Foreign Exchange Market Intervention by a Variety of Options." Korean Journal of Financial Engineering 14, no. 1 (March 2015): 207–44. http://dx.doi.org/10.35527/kfedoi.2015.14.1.008.

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38

Steil, Benn. "Currency Options and the Optimal Hedging of Contingent Foreign Exchange Exposure." Economica 60, no. 240 (November 1993): 413. http://dx.doi.org/10.2307/2554570.

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39

Campa, Jose B., P. H. Kevin Chang, and Robert L. Reider. "ERM bandwidths for EMU and after: evidence from foreign exchange options." Economic Policy 12, no. 24 (April 1997): 53–89. http://dx.doi.org/10.1111/1468-0327.00016.

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40

Supapol, Atipol Bhanich, and Jacques A. Schnabel. "Foreign exchange futures options: A parity-based test of learning effects." International Review of Economics & Finance 1, no. 2 (January 1992): 169–76. http://dx.doi.org/10.1016/1059-0560(92)90033-9.

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Krylova, Elizaveta, Jussi Nikkinen, and Sami Vähämaa. "Cross-dynamics of volatility term structures implied by foreign exchange options." Journal of Economics and Business 61, no. 5 (September 2009): 355–75. http://dx.doi.org/10.1016/j.jeconbus.2009.01.002.

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Ware, Roger, and Ralph Winter. "Forward markets, currency options and the hedging of foreign exchange risk." Journal of International Economics 25, no. 3-4 (November 1988): 291–302. http://dx.doi.org/10.1016/0022-1996(88)90056-6.

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Martin, Vesna. "Intervention Strategies in Foreign Exchange Market." Economic Themes 58, no. 3 (September 1, 2020): 381–99. http://dx.doi.org/10.2478/ethemes-2020-0022.

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Abstract The goal of the paper is to present the intervention strategies used by central banks in order to influence the value of the domestic currency, transparency versus discretion when it comes to publishing data about FX intervention and the cost and effectiveness of intervention. It is rarely that nowadays countries allow for an exchange rate to be formed on the market basis through the effects of supply and demand for foreign exchange on the foreign exchange market. The central bank buys or sells a foreign currency in the foreign exchange market in order to increase or decrease the value of its national currency in comparison to the foreign currency. The reasons for the intervention are the reduction of short-term oscillations of the exchange rate, the impact at the level of foreign exchange reserves, as well as the maintaining the price and financial stability as the ultimate goal of most central banks. The paper will present intervention strategies on foreign exchange market, which involves the implementation of interventions in the market of options, forward, foreign currency repo and foreign currency swaps. Then, on the spot market, interventions using an auction, as well as the application of foreign currency indexed certificates.

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Jung, Yongseung, Soyoung Kim, and Doo Yong Yang. "Capital Control and Monetary Policy in Asian Emerging Market Economies." Asian Economic Papers 17, no. 2 (June 2018): 111–34. http://dx.doi.org/10.1162/asep_a_00613.

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This paper explores two policy options in emerging market economies (EMEs) to cope with volatile capital flows due to external monetary policy shocks; capital control policy and choice of exchange rate regime. Both tools reinforce each other when a foreign exchange risk premium shock hits the economy. A contractionary U.S. monetary policy shock has significant real effects in EMEs. Conventional wisdom tells us that a free floating exchange rate with inflation targeting is better when a country faces foreign shocks. However, we show that a flexible exchange rate with less capital controls is not the best option in EMEs based on vector autoregression analysis. Moreover, we set up a small open economy new Keynesian model with real wage and price rigidities. It shows that the small economy with labor market frictions is more vulnerable to exogenous shocks such as a foreign exchange rate shock under a fixed exchange rate regime than under a flexible exchange regime. We show that maintaining price stability is not desirable when there are substantial frictions in the labor market and the intratemporal elasticity of substitution is high. Finally, the model shows that the welfare cost difference between a policy of maintaining purchasing power and a policy aimed at price stability reverses as the intratemporal elasticity of substitution between home and foreign goods increases.

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Caskey, John P. "The Philadelphia Stock Exchange: Adapting to Survive in Changing Markets." Business History Review 78, no. 3 (2004): 451–87. http://dx.doi.org/10.2307/25096909.

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This article analyzes the evolution of the Philadelphia Stock Exchange (PHLX), America's oldest stock exchange, from 1950 through 2000. PHLX was able to compete against the much larger New York Stock Exchange (NYSE) because it exploited loopholes created by fixed minimum trading commissions prior to 1975. After the liberalization of commissions, the PHLX competed against the NYSE by offering automated executions that met the needs of discount brokers. It also moved early to trade equity options and developed the first exchange-based market for foreign currency options.

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Basanna, Prakash, and K. R. Pundareeka Vittala. "An Analysis of Foreign Exchange Risk Management: Techniques Employed in Indian Pharma Industry." Jindal Journal of Business Research 8, no. 1 (April 16, 2019): 92–107. http://dx.doi.org/10.1177/2278682119833193.

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Foreign exchange risk management (FERM) involves using both internal and external techniques such as forwards, futures, options, and swaps that are called as currency derivatives. The firms with greater growth opportunities and tighter financial constraints are more inclined to use currency derivatives. The Forex market provides various derivative instruments to hedge against currency exposures such as currency forwards, options, futures, and swaps. The current article aims at studying various FERM techniques used in the Indian pharmaceutical industry and its impact on exchange gain/losses. For this purpose, foreign exchange cash flows arising out of imports and exports and exchange gain/losses of the companies during 2010–2017 of 10 sample companies chosen from the pharma industry are used. It is observed from the study that only two currencies—USD and EUR—hold command in the forex market and other currencies are being used minimally. It is also noted that there are several currency derivatives available to the business firms such as forwards, futures, options, and swaps for hedging currency exposure. However, among all these techniques, forward contract is considered to be an effective hedging tool and easier to understand.

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Terada-Hagiwara, Akiko. "Foreign Exchange Reserves, Exchange Rate Regimes, and Monetary Policy: Issues in Asia." Asian Development Review 22, no. 02 (January 2005): 1–34. http://dx.doi.org/10.1142/s011611050550006x.

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This paper seeks to outline issues arising from rapid foreign exchange reserve accumulations in Asia. Attention is paid to People’s Republic of China and India for the significance of the accumulation fed by surges in capital inflows. The paper finds that sterilization interventions by the two economies appear to be effective in curbing credit growth, but the impacts appear limited and short-lived. In this regard, adjustments of exchange rate policies are called for to have more freedom in policy options, though incentives to live with exchange rate fluctuations are still limited, and in fact the currencies have been managed more tightly than before. Therefore, the paper argues that, while maintaining the current exchange rate practices with capital controls in place, domestic reforms should be pushed further to be ready for capital account convertibility and more exchange rate flexibility in the long term.

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Gerasimova, Larisa. "Features of payments in foreign currency in budgetary institutions." Buhuchet v zdravoohranenii (Accounting in Healthcare), no. 4 (April 1, 2020): 19–28. http://dx.doi.org/10.33920/med-17-2004-03.

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The article discusses the procedure for accounting for objects in a foreign currency. It is shown that foreign currency assets, liabilities, and other items are recorded simultaneously in foreign currency and in rubles. Analyzed the accounting treatment of exchange rate differences, it is shown that their records depend on the period. Examples of currency monetary and non-monetary accounting items and the specifics of their reflection in accounting transactions are given. Monetary assets and liabilities are recorded at the exchange rate at the date of recognition. The option of recognition at the reporting date is possible. Non-monetary assets and liabilities are recognized at the date of recognition and are no longer restated. An example of accounting for non-monetary assets accepted by an institution at fair value as an exception to their rules is given. The article reflects that the revaluation of such assets at the new exchange rate is made in cases when the fair value of the object changes. It shows the mechanisms for accounting for the return of advances in foreign currency and options when such debt is recalculated or not recalculated after being accepted for accounting.

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Shastri, Kuldeep, Jahangir Sultan, and Kishore Tandon. "The impact of the listing of options in the foreign exchange market." Journal of International Money and Finance 15, no. 1 (February 1996): 37–64. http://dx.doi.org/10.1016/0261-5606(95)00036-4.

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Аббасова, Т. С., and Т. Э. Аббасов. "Development options for the world monetary system." Voprosy regionalnoj ekonomiki, no. 2(47) (June 18, 2021): 163–69. http://dx.doi.org/10.21499/2078-4023-2021-47-2-163-169.

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Выявлены факторы влияния валютной политики на валютный рынок и реальный сектор экономики Российской Федерации. Составлена модель для анализа факторов, влияющих на уровень заниженности или завышенности валютного курса Российской Федерации по отношению к паритетному валютному курсу. Показано, что уровень заниженности валютного курса отрицательно коррелирует с сальдо платежного баланса и ростом ВВП, при этом положительно коррелирует с уровнем инфляции, уровнем природной ренты в экономике и уровнем коррупции в стране. Предложены организационные мероприятия для повышения эффективности валютного контроля в России. The factors of influence of monetary policy on the foreign exchange market and the real sector of the economy of the Russian Federation are revealed. A model has been compiled to analyze the factors that influence the level of undervaluation or overvaluation of the Russian Federation exchange rate in relation to the parity exchange rate. It is shown that the level of undervaluation of the exchange rate negatively correlates with the balance of payments and GDP growth, while positively correlating with the level of inflation, the level of natural resource rent in the economy and the level of corruption in the country. Organizational measures are proposed to improve the efficiency of currency control in Russia.

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