Autore: Tamborski, Mariusz
Titolo: Currency option pricing with stochastic interest rates and transaction costs: a theoretical model
Periodico: European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1994 - Fascicolo: 9 - Pagina iniziale: 1 - Pagina finale: 35

In this paper, we develop a currency option pricing model with stochastic interest rates and transactions costs when interest parity holds, and it is assumed that domestic and foreign bond prices have local variances that depend only on time. These additional parameters enter in a very simple way, through adjustment of the volatility in the Grabbe (1983) currency option pricing model. The "pure" Garman and Kohlhagen strategy holds only in the limiting case of constant interest rates and zero transactions costs.


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Testo completo: http://hdl.handle.net/1814/489

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