Pricing Foreign Currency Options Under Stochastic Interest Rates

• Main Authors: Ding-Yu Su, 蘇鼎宇
• Other Authors: Shu-Ing Liu
• Format: Others
• Language: zh-TW
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/82238338471559999515

碩士 === 世新大學 === 財務金融學研究所(含碩專班) === 92 === Since 1971 the president of American Nixon acclaim to withdraw the Bretton Woods appointments. The fix rate system has almost collapsed. The volatility of the exchange rate makes deep influence for the stability of the international business income. Foreign option has become the metro security tool in the global finance market, and is booming now in the commence market. Therefore the account of the options price get a pensive discussion. This research used the simplified Duan’s (1999) stochastic volatility GARCH model、Rabinovitch’s (1989) stochastic interest model and Ritchken & Trevor’s（1999） GARCH trinomial trees model to induct four models. We take advantage of these four models to discuss which model could price the options price which most close the true value in market under the return of the stochastic volatility and interest stochastic situation. As the result of the empirical study, we find the Ritchken & Trevor’s（1999） GARCH trinomial trees model is the best one. The reason might be the volume of the standard options is small in PHLX, if market price the options by B-S model under the small volume of the standard options sample, we will find out the market price is closed to the B-S model. This consequence would be almost equal to the infinite in R-T model. If we could get those large volume data the pricing models should be more closed the market price.