Black (1976) model assumes a lognormal distribution for futures prices, and has been shown to misprice deep in-the-money and deep out-of-the-money futures options. In this paper, the jump-diffusion stochastic interest rates model developed by Doffou and Hilliard (1999a) is fitted to currency...

We investigate the effects of stochastic interest rates and jumps in the spot exchange rate on the pricing of currency futures, forwards and futures options. The proposed model extends Bates' model by allowing both the domestic and foreign interest rates to move around randomly, in a generalized...

This article develops a method for valuing contingent payoffs for a non-constant volatility process via a simple recombining binomial tree. The direct application of the technology provides a way to price, for example, American calls or puts governed by a stock price process with stochastic...

Univariate procedures for valuing contingent payoffs for a non-constant volatility process via a recombining tree were developed by Nelson and Ramaswamy (RFS, 1990). Their results have been extended to the bivariate case for a subset of diffusions by, among others, Kishimoto (JF, 1989), Boyle,...

Black (1976) model assumes a lognormal distribution for futures prices, and has been shown to misprice deep in-the-money and deep out-of-the-money futures options. in this paper, the jump-diffusion stochastic interest rates model developed by Doffou and Hilliard (1999a) is fitted to currency...

We consider returns from rebalanced and buy and hold portfolios consisting of the same stocks. Theoretical properties are derived using Jensen's inequality and the Hölder's Defect Formula. Simulations are used to confirm theory and to investigate ambiguous cases where theory is silent....