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タイトル: An Asymptotic Expansion Approach to Currency Options with a Market Model of Interest Rates under Stochastic Volatility Processes of Spot Exchange Rates
著者: Takahashi, Akihiko
Takehara, Kohta
発行日: 2007年2月
出版者: 日本経済国際共同センター
抄録: This paper proposes an asymptotic expansion scheme of currency options with a libor market model of interest rates and stochastic volatility models of spot exchange rates. In particular, we derive closed-form approximation formulas for the density functions of the underlying assets and for pricing currency options based on the third order asymptotic expansion scheme; we do not model a foreign exchange rate's variance such as in Heston[1993], but its volatility that follows a general time-inhomogeneous Markovian process, and we allow the correlations among all the factors, that is domestic and foreign interest rates, a spot foreign exchange rate and its volatility. Finally, we provide numerical examples and apply the pricing formula to the calibration of volatility surfaces in the JPY/USD option market.
内容記述: Revised in August 2007 and January 2009; subsequently published in Asia-Pacific Financial Markets, vol.14, pp.69-121, 2007.
URI: http://hdl.handle.net/2261/4075
その他の識別子: CIRJE-F-474
出現カテゴリ:061 ディスカッションペーパー
Discussion Paper F series (in English)


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