Controlling Currency Risk with Options or Forwards

  • Nikolas Topaloglou
  • Hercules Vladimirou
  • Stavros A. Zenios
Part of the Springer Optimization and Its Applications book series (SOIA, volume 18)


Exchange Rate Foreign Currency Scenario Tree Sharpe Ratio Strike Price 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. 1.
    Abken, P., Madan, D., and Ramamurtie, S. Estimation of risk-neutral and statistical densities by Hermite polynomial approximation: With an application to eurodolar futures options. Manuscript, Federal Reserve Bank of Atlanta, 1996a.Google Scholar
  2. 2.
    Abken, P., Madan, D., and Ramamurtie, S. Pricing S&P500 index options using a Hilbert space basis. Manuscript, Federal Reserve Bank of Atlanta, 1996b.Google Scholar
  3. 3.
    Ait-Sahalia, Y., and Lo, A. W. Non parametric risk management and implied risk aversion. Journal of Econometrics, 94(1-2):9–51, 2000.MATHCrossRefGoogle Scholar
  4. 4.
    Albuquerque, R. Optimal currency hedging. Global Finance Journal, 18(1): 16–33, 2007.CrossRefGoogle Scholar
  5. 5.
    Backus, D., Foresi, S., Li, K., and Wu, L. Accounting for biases in Black-Scholes. Working paper no. 02011, CRIF, 1997.Google Scholar
  6. 6.
    Brenner, M., and Eom, Y. No-arbitrage option pricing: New evidence on the validity of the martingale property. Manuscript, Federal Reserve Bank of New York, 1997.Google Scholar
  7. 7.
    Conover, J. A., and Dubofsky, D. A. Efficient selection of insured currency positions, protective puts versus fiduciary calls. Journal of Financial and Quantitative Analysis, 30(2):295–312, 1995.CrossRefGoogle Scholar
  8. 8.
    Corrado, C. J., and Su, T. Skewness and kurtosis in S&P500 index returns implied by option prices. The Journal of Financial Research, XIX(2):175–192, 1996.Google Scholar
  9. 9.
    Dupačová, J., Consigli, G., and Wallace, S. W. Generating scenarios for multistage stochastic programs. Annals of Operations Research, 100:25–53, 2000.MATHCrossRefMathSciNetGoogle Scholar
  10. 10.
    Eun, C. S., and Resnick, B. G. Exchange rate uncertainty, forward contracts and international portfolio selection. Journal of Finance, 43(1):197–215, 1988.CrossRefGoogle Scholar
  11. 11.
    Eun, C. S., and Resnick, B. G. International diversification of investment portfolios: U.S. and Japanese perspectives. Management Science, 40(1):140–161, 1994.CrossRefGoogle Scholar
  12. 12.
    Fama, E. F. The behavior of stock-market prices. Journal of Business, 38:34–105, 1965.CrossRefGoogle Scholar
  13. 13.
    Høyland, K., Kaut, M., and Wallace, S. W. A heuristic for generating scenario trees for multistage decision problems. Computational Optimization and Applications, 24(2-3):169–185, 2003.CrossRefMathSciNetGoogle Scholar
  14. 14.
    Jarque, C. M., and Berra, A. K. Efficient tests for normality, homoscedasticity and serial independencce of regression residuals. Economic Letters, 6(3): 255–259, 1980.CrossRefGoogle Scholar
  15. 15.
    Jarrow, R., and Rudd, A. Approximate option valuation for arbitrary stochastic processes. Journal of Financial Economics, 10(3):347–369, 1982.CrossRefGoogle Scholar
  16. 16.
    Johnson, N., Kotz, S., and Balakrishnan, N. Continuous Univariate Distributions. Wiley, New York, 1994.Google Scholar
  17. 17.
    Jorion, P. Mean-variance analysis of currency overlays. Financial Analyst Journal, 50(3):48–56, 1994.CrossRefGoogle Scholar
  18. 18.
    Knight, J., and Satchell, S. Return Distributions in Finance. Butterworth and Heinemann, New York, 2000.Google Scholar
  19. 19.
    Kolassa, J. Series Approximation Methods in Statistics. Springer-Verlag, New York, 1994.Google Scholar
  20. 20.
    Lien, D., and Tse, Y. K. Hedging downside risk: Futures vs. options. International Review of Economics and Finance, 10:159–169, 2001.CrossRefGoogle Scholar
  21. 21.
    Longstaff, F. Options pricing and the martingale restriction. Review of Financial Studies, 8(4):1091–1124, 1995.CrossRefGoogle Scholar
  22. 22.
    Madan, D., and Milne, F. Contingent claims valued and hedged by pricing and investing in a basis. Mathematical Finance, 4(3):223–245, 1994.MATHCrossRefMathSciNetGoogle Scholar
  23. 23.
    Markowitz, H. Portfolio selection. Journal of Finance, 8:77–91, 1952.CrossRefGoogle Scholar
  24. 24.
    Maurer, R., and Valiani, S. Hedging the exchange rate risk in international portfolio diversification: Currency forwards versus currency options. Working paper, Göethe-Universität Frankfurt am Main, 2003.Google Scholar
  25. 25.
    Rockafellar, R.T., and Uryasev, S. Conditional Value-at-Risk for general distributions. Journal of Banking and Finance, 26(7):1443–1471, 2002.CrossRefGoogle Scholar
  26. 26.
    Sortino, F. A., and van der Meer, R. Downside risk–Capturing what's at stake in investment situations. Journal of Portfolio Management, 17(4):27–31, 1991.CrossRefGoogle Scholar
  27. 27.
    Sortino, F. A., Plantinga, A., and van der Meer, R. The Dutch triangle–A frame-work to measure upside potential relative to downside risk. Journal of Portfolio Management, 26(1):50–58, 1999.CrossRefGoogle Scholar
  28. 28.
    Steil, B. Currency options and the optimal hedging of contingent foreign exchange exposure. Economica, 60(240):413–431, 1993.CrossRefGoogle Scholar
  29. 29.
    Topaloglou, N., Vladimirou, H., and Zenios, S. A. CVaR models with selective hedging for international asset allocation. Journal of Banking and Finance, 26(7):1535–1561, 2002.CrossRefGoogle Scholar
  30. 30.
    Topaloglou, N., Vladimirou, H., and Zenios, S. A. A dynamic stochastic programming model for international portfolio management. European Journal of Operations Research (forthcoming).Google Scholar
  31. 31.
    Topaloglou, N., Vladimirou, H., and Zenios, S. A. Pricing options on scenario trees. Journal of Banking and Finance (forthcoming).Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  • Nikolas Topaloglou
    • 1
  • Hercules Vladimirou
    • 1
  • Stavros A. Zenios
    • 1
  1. 1.HERMES European Center of Excellence on Computational Finance and EconomicsSchool of Economics and Management, University of CyprusNicosiaCyprus

Personalised recommendations