BIROn - Birkbeck Institutional Research Online

    No arbitrage between economies and correlation risk management

    Geman, Helyette (1997) No arbitrage between economies and correlation risk management. Computional Economics 10 , pp. 119-138. ISSN 1572-9974.

    Full text not available from this repository.

    Abstract

    The first goal of this paper is to clarify the implications of the no arbitrage assumption in the context of several countries and extend to a general setting of continuous-time finance and stochastic interest rates results which were more or less present in classical finance models such as the international APT (see Solnik (1983)). In particular, the remarkable relationship between the risk premia in two different countries and the sole volatility of the exchange rate is easily derived. Secondly, we examine the pricing and hedging of cross-currencies options when interest rates are stochastic in all countries. The dependence of risk neutrality arguments on the reference numéraire as developed in Geman (1989) becomes particularly clear in the case of several currencies.

    Metadata

    Item Type: Article
    School: School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Sarah Hall
    Date Deposited: 23 Jun 2020 07:09
    Last Modified: 23 Jun 2020 07:09
    URI: https://eprints.bbk.ac.uk/id/eprint/32345

    Statistics

    Downloads
    Activity Overview
    0Downloads
    60Hits

    Additional statistics are available via IRStats2.

    Archive Staff Only (login required)

    Edit/View Item Edit/View Item