EconStor >
Frankfurt School of Finance and Management, Frankfurt a. M. >
CPQF Working Paper Series, Frankfurt School of Finance and Management >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/40178
  
Title:On the cost of delayed currency fixing announcements PDF Logo
Authors:Becker, Christoph
Wystup, Uwe
Issue Date:2005
Series/Report no.:CPQF Working Paper Series 3
Abstract:In Foreign Exchange Markets vanilla and barrier options are traded frequently. The market standard is a cutoff time of 10:00 a.m. in New York for the strike of vanillas and a knock-out event based on a continuously observed barrier in the inter bank market. However, many clients, particularly from Italy, prefer the cutoff and knock-out event to be based on the fixing published by the European Central Bank on the Reuters Page ECB37. These barrier options are called discretely monitored barrier options. While these options can be priced in several models by various techniques, the ECB source of the fixing causes two problems. First of all, it is not tradable, and secondly it is published with a delay of about 10 - 20 minutes. We examine here the effect of these problems on the hedge of those options and consequently suggest a cost based on the additional uncertainty encountered.
Subjects:exotic options
currency fixings
JEL:C15
G12
Document Type:Working Paper
Appears in Collections:CPQF Working Paper Series, Frankfurt School of Finance and Management

Files in This Item:
File Description SizeFormat
510130968.pdf280.27 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/40178

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.