N. Bollen, S. Gray and R. Whaley, "Regime switching in foreign exchange rates: evidence from currency option prices," Journal of Econometrics 94, 2000, 239-- 276. Home/Search Document Details and Download
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Convertible Securities Hedging: A Case Study - Pagli (Correct)
.... linear models [5] 10] 12] 14] 16] 24] some of these results could be extended to non linear systems [15] and [17] Although the idea of modelling by using switching models is not new in the finance literature, most works are set in the context of discrete time models, for instance, [6], 7] 8] 11] and others. In the continuous time setting, few works are available, for instance, 9] 18] 28] and [29] On the other hand, one may see in this paper that although the control problem is not a linear control problem with quadratic cost, an approach similar to [14] may be ....
N. Bollen, S. Gray and R. Whaley, "Regime switching in foreign exchange rates: evidence from currency option prices," Journal of Econometrics 94, 2000, 239-- 276.
The performance of alternative valuation models in the OTC.. - Bollen, Rasiel (Correct)
....of alternative stochastic processes directly from option prices. This paper contributes to the literature on currency option valuation by comparing the performance of a standard option valuation model to option valuation models based on regime switching and GARCH processes. To our knowledge, Bollen, Gray, and Whaley s (2000) empirical study of regime switching option valuation is the only published test of either model in the foreign exchange market. Our study offers three insights. First, we can determine whether more complex option valuation models offer any advantages over standard models. The result will suggest ....
.... can be written as ( 1 Pr F = t t i R , and can be constructed recursively in a Bayesian framework as described in Gray (1996) In most applications of regime switching models, the mean of the distribution is allowed to vary across regimes, sometimes switching with the volatility, or, as in Bollen, Gray, Whaley (2000), switching independently. In this analysis, we restrict the mean to be constant across regimes for several reasons. First, a constant mean will allow a focused comparison between the regime switching model and a GARCH model. The only difference between the two models is the way in which ....
Bollen NPB, Gray SF, Whaley RE, 2000. Regime-switching in foreign exchange rates: evidence from currency option prices. Journal of Econometrics 94, 239-276.
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