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Article: Equilibrium valuation of foreign exchange claims
Title | Equilibrium valuation of foreign exchange claims |
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Authors | |
Issue Date | 1997 |
Citation | Journal of Finance, 1997, v. 52, n. 2, p. 799-826 How to Cite? |
Abstract | This 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 Identifier | http://hdl.handle.net/10722/212767 |
ISSN | 2021 Impact Factor: 7.915 2020 SCImago Journal Rankings: 18.151 |
DC Field | Value | Language |
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dc.contributor.author | Bakshi, Gurdip S. | - |
dc.contributor.author | Chen, Zhiwu | - |
dc.date.accessioned | 2015-07-28T04:04:57Z | - |
dc.date.available | 2015-07-28T04:04:57Z | - |
dc.date.issued | 1997 | - |
dc.identifier.citation | Journal of Finance, 1997, v. 52, n. 2, p. 799-826 | - |
dc.identifier.issn | 0022-1082 | - |
dc.identifier.uri | http://hdl.handle.net/10722/212767 | - |
dc.description.abstract | This 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.language | eng | - |
dc.relation.ispartof | Journal of Finance | - |
dc.title | Equilibrium valuation of foreign exchange claims | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.scopus | eid_2-s2.0-0039054772 | - |
dc.identifier.volume | 52 | - |
dc.identifier.issue | 2 | - |
dc.identifier.spage | 799 | - |
dc.identifier.epage | 826 | - |
dc.identifier.issnl | 0022-1082 | - |