Pricing American options on foreign currency with stochastic volatility, jumps, and stochastic interest rates

Jia-Hau Guo, Mao Wei Hung*

*Corresponding author for this work

研究成果: Article同行評審

6 引文 斯高帕斯(Scopus)

摘要

By applying the Heath-Jarrow-Morton (HJM) framework, an analytical approximation for pricing American options on foreign currency under stochastic volatility and double jump is derived. This approximation is also applied to other existing models for the purpose of comparison. There is evidence that such types of jumps can have a critical impact on early-exercise premiums that will be significant for deep out-of-the-money options with short maturities. Moreover, the importance of the term structure of interest rates to early-exercise premiums is demonstrated as is the sensitivity of these premiums to correlation-related parameters.

原文English
頁(從 - 到)867-891
頁數25
期刊Journal of Futures Markets
27
發行號9
DOIs
出版狀態Published - 1 九月 2007

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