Currency Option Pricing in Credible Target Zones / Bernard Dumas, L. Peter Jennergren, Bertil Naslund.

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Dumas, Bernard

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w4522.Publication details: Cambridge, Mass. National Bureau of Economic Research 1993.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: This paper develops a model for valuing options on a currency which is maintained within a band. The starting point of our model is the well known Krugman model for exchange-rate behavior within a target zone. Results from model runs provide insight into evidence reported by other authors of mispricing of currency options by extensions of the Black-Scholes model.

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November 1993.

This paper develops a model for valuing options on a currency which is maintained within a band. The starting point of our model is the well known Krugman model for exchange-rate behavior within a target zone. Results from model runs provide insight into evidence reported by other authors of mispricing of currency options by extensions of the Black-Scholes model.