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Currency Option Pricing Models and Extra-Ordinary Risk
So, Jacky Yuk-chow
2011
Conference Name3rd International Conference on Risk Analysis and Crisis Response
Source PublicationBEYOND EXPERIENCE IN RISK ANALYSIS AND CRISIS RESPONSE
Volume16
Pages130-139
Conference DateMAY 22-25, 2011
Conference PlaceTexas A&M Int Univ, Laredo, TX
PublisherATLANTIS PRESS
Abstract

Most currency option pricing models, such as the Garmen-Kohlhagen model and Grabbe model, assume that changes of exchange rates are normally distributed. The assumption is not consistent with empirical evidence and may create biased volatility estimates and unreliable hedged ratios. The author recommends the McCullouch model which can capture the extreme changes in foreign exchange rates and thus may be useful for pricing currency options during crisis such as the stock market crash in 1989, the crisis of the currencies of the European Monetary system at the end of 1992 as well as the 2008 sub-prime mortgage loan and banking crisis. The author will also evaluate the performance of the models.

Indexed ByCPCI
Language英语
WOS Research AreaComputer Science ; Science & Technology - Other Topics
WOS SubjectComputer Science, Artificial Intelligence ; Multidisciplinary Sciences
WOS IDWOS:000296892600023
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Cited Times [WOS]:0   [WOS Record]     [Related Records in WOS]
Document TypeConference paper
CollectionFaculty of Business Administration
DEPARTMENT OF FINANCE AND BUSINESS ECONOMICS
AffiliationUniv Macau, Fac Business Adm, Taipa, Peoples R China
First Author AffilicationUniversity of Macau
Recommended Citation
GB/T 7714
So, Jacky Yuk-chow. Currency Option Pricing Models and Extra-Ordinary Risk[C]:ATLANTIS PRESS,2011:130-139.
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