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Article: Equilibrium valuation of foreign exchange claims

TitleEquilibrium valuation of foreign exchange claims
Authors
Issue Date1997
Citation
Journal of Finance, 1997, v. 52, n. 2, p. 799-826 How to Cite?
AbstractThis article studies the equilibrium valuation of foreign exchange contingent claims. Within a continuous-time Lucas (1982) two-country model, exchange rates, interest rates and, in particular, factor risk prices are all endogenously and jointly determined. This guarantees the internal consistency of these price processes with a general equilibrium. In the same model, closed-form valuation formulas are presented for currency options and currency futures options. Common to these formulas is that stochastic volatility and stochastic interest rates are admitted. Hedge ratios and other comparative statics are also provided analytically. It is shown that most existing currency option models are included as special cases.
Persistent Identifierhttp://hdl.handle.net/10722/212767
ISSN
2015 Impact Factor: 5.105
2015 SCImago Journal Rankings: 14.546

 

DC FieldValueLanguage
dc.contributor.authorBakshi, Gurdip S.-
dc.contributor.authorChen, Zhiwu-
dc.date.accessioned2015-07-28T04:04:57Z-
dc.date.available2015-07-28T04:04:57Z-
dc.date.issued1997-
dc.identifier.citationJournal of Finance, 1997, v. 52, n. 2, p. 799-826-
dc.identifier.issn0022-1082-
dc.identifier.urihttp://hdl.handle.net/10722/212767-
dc.description.abstractThis article studies the equilibrium valuation of foreign exchange contingent claims. Within a continuous-time Lucas (1982) two-country model, exchange rates, interest rates and, in particular, factor risk prices are all endogenously and jointly determined. This guarantees the internal consistency of these price processes with a general equilibrium. In the same model, closed-form valuation formulas are presented for currency options and currency futures options. Common to these formulas is that stochastic volatility and stochastic interest rates are admitted. Hedge ratios and other comparative statics are also provided analytically. It is shown that most existing currency option models are included as special cases.-
dc.languageeng-
dc.relation.ispartofJournal of Finance-
dc.titleEquilibrium valuation of foreign exchange claims-
dc.typeArticle-
dc.description.natureLink_to_subscribed_fulltext-
dc.identifier.scopuseid_2-s2.0-0039054772-
dc.identifier.volume52-
dc.identifier.issue2-
dc.identifier.spage799-
dc.identifier.epage826-

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