search query: @author Jennergren, L. / total: 3
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| Author: | Ekvall, N. Jennergren, L. Naeslund, B. |
| Title: | Currency option pricing with mean reversion and uncovered interest parity: a revision of the Garman-Kohlhagen model |
| Journal: | European Journal of Operational Research
1997 : JUL 1, VOL. 100:1, p. 41-59 |
| Index terms: | OPERATIONAL RESEARCH FINANCE CURRENCY OPTIONS |
| Language: | eng |
| Abstract: | The authors consider a model for the pricing of currency options where the logarithm of the exchange rate exhibits mean reversion, i.e., follows the Ornstein-Uhlenbeck process. The authors mention reasons why exchange rates could exhibit mean reversion. The domestic and foreign short interest rates are related to the logarithm of the exchange rate through Uncovered Interest Parity. Under these assumptions, the authors derive formulas for the value of a European currency option, from the point of view of both domestic and foreign investors. |
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