|
Archive@NYU >
Stern School of Business >
Salomon Center >
Financial Econometrics >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26927
|
| Title: | Stochastic Skew in Currency Options |
| Authors: | Carr, Peter
Wu, Liuren |
| Issue Date: | 13-May-2004 |
| Series/Report no.: | SC-CFE-04-02 |
| Abstract: | We document the behavior of over-the-counter currency option prices
across moneyness, maturity, and calendar time on two of the most
actively traded currency pairs over the past eight years. We find that
the risk-neutral distribution of currency returns is relatively
symmetric on average. However, on any given date, the conditional
currency return distribution can show strong asymmetry. This asymmetry
varies greatly over time and often switch directions. We design and
estimate a class of models that capture these unique features of the
currency options prices and perform much better than traditional
jump-diffusion stochastic volatility models. |
| URI: | http://hdl.handle.net/2451/26927 |
| Appears in Collections: | Financial Econometrics
|
All items in Faculty Digital Archive are protected by copyright, with all rights reserved.
|
