A Stochastic Skew Model for Currency Options
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Date: 03-29-2004
Start Time:
5:30pm
End Time: 7:00pm
Speaker: Peter Carr, Bloomberg
Location: 412 Schapiro CEPSR, Davis Auditorium
ABSTRACT
We document the behavior of the over-the-counter currency options across moneyness, maturity, and calendar time on four of the most actively traded currency pairs. We find that although on average the risk-neutral distribution of the currency returns is relatively symmetric, at any given date the conditional currency return distribution can exhibit strong asymmetry, and this asymmetry varies greatly over time. Within the framework of time-changed Levy processes, we design and estimate a class of models that capture this and other unique features of currency options.
joint work with Liuren Wu
BIO
Dr. Peter Carr recently joined Boomberg to head up a new group conducting
quantitative research. He is also the new director of the Masters in Math
Finance program at NYU's Courant Institute. Prior to his current positions, he
headed equity derivative research groups for six years at Banc of America
Securities and at Morgan Stanley. His prior academic positions include 4 years
as an adjunct professor at Columbia University and 8 years as a finance
professor at Cornell University. Since receiving his PhD. in Finance from UCLA
in 1989, he has published extensively in both academic and industry-oriented
journals. He is currently the treasurer of the Bachelier Finance Society and a
practitioner director for the Financial Management Association. He is also an
associate editor for 6 academic journals related to mathematical finance and
derivatives. He has given numerous talks at both practitioner and academic
conferences and was selected as Risk Magazine's prestigious "Quant of the
Year'' for 2003.