Publication
Title
On the cost of delayed currency fixing announcements
Author
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 1020 min. 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.
Language
English
Source (journal)
Annals of Finance. - Berlin
Publication
Berlin : 2009
ISSN
1614-2446
Volume/pages
5:2(2009), p. 161-174
Full text (Publisher's DOI)
Full text (publisher's version - intranet only)
UAntwerpen
Faculty/Department
Publication type
Subject
External links
Record
Identification
Creation 03.03.2015
Last edited 11.03.2017