Foreign Currency Option Pricing Model with Heavy-tailed Exchange Rate Return

摘要

This paper develops efficient method for pricing foreign currency options when the exchange rate returns have a heavy-tailed distribution. In modeling heavy tails, we deduce foreign currency options pricing model based on exchange rate returns having StudenW distribution and estimate v degrees of freedom of Student-r distribution by Method of Moments Estimator. Finally, we compare and analyze the results coming from using foreign currency options model with t distribution and from BSGK model.