Option and Futures Evaluation With Deterministic Volatilities1

Farshid Jamshidian

Mathematical Finance, 1993, vol. 3, issue 2, 149-159

Abstract: Several risk‐neutral expectation formulae are derived in a general multifactor setting. Specializing to deterministic covariances of returns, they lead to formulae for forward and future prices as well as formulae for options on forward and futures contracts. the results are applicable to currencies, bonds, commodities with stochastic convenience yield, and stock indices. For currencies, a noarbitrage relation between domestic and foreign economies is formulated and applied to evaluate quanto futures and options.

Date: 1993
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