search query: @author Schnabel, J. A. / total: 8
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| Author: | Schnabel, J. A. Roumi, E. |
| Title: | Setting the limits on a flexible forward |
| Journal: | Omega
1991 : VOL. 19:5, p. 421-428 |
| Index terms: | CURRENCY MARKETS MONEY MARKETS CURRENCY PRICING MODELS SIMULATION |
| Language: | eng |
| Abstract: | A forward contract to buy foreign currency is an obligation to purchase a certain quantity of the given currency on the date the contract matures at a stipulated price called the forward rate. A new type of forward contract was analyzed. By employing option pricing theory, two models were developed to assist firms in deciding whether the upper and lower band limits of a flexible forward are appropriate. These limits were alternatively defined in terms of deviation from the forward rate and the current spot rate. The models were simulated and the simple intuition underlying the results of the simulation was explained. |
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