Optimal use of currency options

Ba Murtagh

Omega, 1989, vol. 17, issue 2, 189-192

Abstract: The use of currency options to balance foreign exchange exposure is considered. The paper describes a computer model which optimizes the level of hedging in options and the exercise price while simultaneously achieving a desired level of risk. Both the objective function and constraints turn out to be nonlinear, and a nonlinear programming code is employed to solve the model. Details of computer implementation are given and a numerical example is described.

Date: 1989
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