Pricing FX Options in the Heston/CIR Jump-Diffusion Model with Log-Normal and Log-Uniform Jump Amplitudes
| Autor: | Ante Prodan, Rehez Ahlip |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2015 |
| Předmět: |
Statistics and Probability
Stochastic volatility Article Subject Applied Mathematics lcsh:Mathematics Jump diffusion Implied volatility lcsh:QA1-939 Computer Science::Computers and Society Heston model Modeling and Simulation Volatility swap Volatility smile Forward volatility Econometrics Volatility (finance) Analysis Mathematics |
| Zdroj: | International Journal of Stochastic Analysis, Vol 2015 (2015) |
| ISSN: | 2090-3332 |
| DOI: | 10.1155/2015/258217 |
| Popis: | 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. |
| Databáze: | OpenAIRE |
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