| dc.description.abstract | Now a day, most investors like to use the Black-Scholes model to
price the financial asset value. Because we substitute the underlying asset
price, exercise price, the risk-free interest rate, time to maturity and
volatility to the B-S model, we can find the closed-form solution.
Researchers of Black-Scholes model often reject the constant-volatility.
However, in this article we proof that the B-S model can be close to the
path of the exchange rate’s actual value for NTD/USD by individual
simulation. By each bank of μ and σ, we can predict the next 10 days,
20 days, and 30days of NTD/USD, and find the applicability of
predicting under the B-S model.
This research involves the Monte Carlo simulation by the Metlab
program. There are three kind of method for deciding the duration for
simulation. When drawing on each bank of μ and σ, we predict the
next period’s actual value of NTD/USD by Naïve method.
Results of this study show the Fixed Time Interval method is
superior to the others by simulating the historic exchange rate. The Event-
Drive method is second, and the Month Downward method is last. For
predicting the next 10 days, it is drawn out μ and σ by the Fixed Time
Interval method that is superior to the others. The Event-Drive method is
inferior to Fixed Time Interval method but superior to Month Downward
method. For predicting the next 20 days, the built-in duration method is
superior to the others. The Month Downward method is subordinate to
the Fixed Time Interval method but better than the Event-Drive method.
To conclude, this study may be of importance in explaining the
dynamic relationship between μ , σ and jumps, as well as providing the
best method to anticipate the exchange rate. | en_US |