Barrier option pricing for exchange rates under the Levy–HJM processes

Pao-Peng Hsu and Ying-Hsiu Chen

Finance Research Letters, 2012, vol. 9, issue 3, 176-181

Abstract: In this paper, we present closed-forms for the valuation of the barrier option whose underlying is exchange rate under the multi-dimensional Levy process, including stochastic interest rates and stochastic assets. Instantaneous forward interest rates are assumed under the Heath et al. [1992. Econometrica 60, 77–105] framework, and the analytic formulas of the exchange rate barrier option are obtained when the Levy process is restricted in a double exponential process.

Keywords: Levy process; Barrier option; HJM (search for similar items in EconPapers)
JEL-codes: C02 C60 G11 G13 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:9:y:2012:i:3:p:176-181

DOI: 10.1016/j.frl.2011.10.002

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