Timeline for FX Option with Different Premium Currency
Current License: CC BY-SA 3.0
8 events
| when toggle format | what | by | license | comment | |
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| Feb 8, 2017 at 21:10 | comment | added | Tim |
@will, I'm really referring to case (1) given by Gordon's answer below. Sry if my question was confusing. However, I'm also glad for your comment as this may have inspired the comparision between the two payout structures.
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| Feb 8, 2017 at 20:59 | vote | accept | Tim | ||
| Feb 8, 2017 at 14:50 | answer | added | Gordon | timeline score: 7 | |
| Feb 8, 2017 at 11:02 | comment | added | will | @Tim look up quanto options and girsanov. Essentially the result is you change your fwd curve by $e^{-\rho_{AB} \sigma_A \sigma_B t}$. The question then becomes what volatilities do you use? | |
| Feb 8, 2017 at 10:05 | answer | added | rupweb | timeline score: 2 | |
| Feb 7, 2017 at 22:00 | comment | added | Tim | @Gordon, thx, would you mind providing an example under GBM assumptions? | |
| Feb 7, 2017 at 21:45 | comment | added | Gordon | You need volatilities from two exchange rates and the correlation. That is, you need a measure change from CHF to USD. | |
| Feb 7, 2017 at 21:27 | history | asked | Tim | CC BY-SA 3.0 |