IDEAS home Printed from https://ideas.repec.org/a/hin/jnijsa/258217.html
   My bibliography  Save this article

Pricing FX Options in the Heston/CIR Jump-Diffusion Model with Log-Normal and Log-Uniform Jump Amplitudes

Author

Listed:
  • Rehez Ahlip
  • Ante Prodan

Abstract

We examine foreign exchange options in the jump-diffusion version of the Heston stochastic volatility model for the exchange rate with log-normal jump amplitudes and the volatility model with log-uniformly distributed jump amplitudes. We assume that the domestic and foreign stochastic interest rates are governed by the CIR dynamics. The instantaneous volatility is correlated with the dynamics of the exchange rate return, whereas the domestic and foreign short-term rates are assumed to be independent of the dynamics of the exchange rate and its volatility. The main result furnishes a semianalytical formula for the price of the foreign exchange European call option.

Suggested Citation

  • Rehez Ahlip & Ante Prodan, 2015. "Pricing FX Options in the Heston/CIR Jump-Diffusion Model with Log-Normal and Log-Uniform Jump Amplitudes," International Journal of Stochastic Analysis, Hindawi, vol. 2015, pages 1-15, July.
    • Handle: RePEc:hin:jnijsa:258217
    DOI: 10.1155/2015/258217
    as

    Download full text from publisher

    File URL: http://downloads.hindawi.com/journals/IJSA/2015/258217.pdf
    Download Restriction: no
    File URL: http://downloads.hindawi.com/journals/IJSA/2015/258217.xml
    Download Restriction: no
    File URL: https://libkey.io/10.1155/2015/258217?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fazlollah Soleymani & Andrey Itkin, 2019. "Pricing foreign exchange options under stochastic volatility and interest rates using an RBF--FD method," Papers 1903.00937, arXiv.org.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hin:jnijsa:258217. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mohamed Abdelhakeem (email available below). General contact details of provider: https://www.hindawi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.