Access

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

If You Use a Screen Reader

This content is available through Read Online (Free) program, which relies on page scans. Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.

Pricing European Currency Options: A Comparison of the Modified Black- Scholes Model and a Random Variance Model

Marc Chesney and Louis Scott
The Journal of Financial and Quantitative Analysis
Vol. 24, No. 3 (Sep., 1989), pp. 267-284
DOI: 10.2307/2330812
Stable URL: http://www.jstor.org/stable/2330812
Page Count: 18
  • Read Online (Free)
  • Download ($34.00)
  • Subscribe ($19.50)
  • Cite this Item
Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Pricing European Currency Options: A Comparison of the Modified Black- Scholes Model and a Random Variance Model
Preview not available

Abstract

We use the modified Black-Scholes model and a random variance option pricing model to study prices of European currency options traded in Geneva. The options, which cannot be exercised early, include calls and puts on the dollar/Swiss franc exchange rate. In the empirical analysis, we examine the model fit and the biases with respect to the strike price, time to maturity, and volatility. There is some evidence of mispricing and there are small gains available by trading with the random variance model.

Page Thumbnails

  • Thumbnail: Page 
267
    267
  • Thumbnail: Page 
268
    268
  • Thumbnail: Page 
269
    269
  • Thumbnail: Page 
270
    270
  • Thumbnail: Page 
271
    271
  • Thumbnail: Page 
272
    272
  • Thumbnail: Page 
273
    273
  • Thumbnail: Page 
274
    274
  • Thumbnail: Page 
275
    275
  • Thumbnail: Page 
276
    276
  • Thumbnail: Page 
277
    277
  • Thumbnail: Page 
278
    278
  • Thumbnail: Page 
279
    279
  • Thumbnail: Page 
280
    280
  • Thumbnail: Page 
281
    281
  • Thumbnail: Page 
282
    282
  • Thumbnail: Page 
283
    283
  • Thumbnail: Page 
284
    284