| 摘要(英) |
This paper derives a pricing model for a quanto equity swap in which one party pays the domestic floating interest rate and the other pays the foreign stock return determined in foreign currency but paid in domestic one. We use the risk-neutral valuation technique developed by Amin and Bodurtha (1995) to generate an arbitrage-free pricing model. We obtain a closed-form solution under further specific assumptions on parameters and state variables. Our pricing formulae show that the value of a quanto equity swap at the start does not depend on the foreign stock level but on the term structures of both countries and other parameters. Between two payment dates, however, the foreign stock level do affect the swap value. The numerical implementation indicates that the domestic and foreign term structures, the correlation between the foreign interest rate and the exchange rate, and the correlation between the exchange rate and the foreign stock are more important factors than other parameters. If the valuation time is between two payment dates, the foreign stock price is also a key factor in valuing a quanto equity swap. |
| 論文目次 |
This paper derives a pricing model for a quanto equity swap in which one party pays the domestic floating interest rate and the other pays the foreign stock return determined in foreign currency but paid in domestic one. We use the risk-neutral valuation technique developed by Amin and Bodurtha (1995) to generate an arbitrage-free pricing model. We obtain a closed-form solution under further specific assumptions on parameters and state variables. Our pricing formulae show that the value of a quanto equity swap at the start does not depend on the foreign stock level but on the term structures of both countries and other parameters. Between two payment dates, however, the foreign stock level do affect the swap value. The numerical implementation indicates that the domestic and foreign term structures, the correlation between the foreign interest rate and the exchange rate, and the correlation between the exchange rate and the foreign stock are more important factors than other parameters. If the valuation time is between two payment dates, the foreign stock price is also a key factor in valuing a quanto equity swap. |
| 參考文獻 |
1.Amin, K.I., and J.N. Bodurtha, Jr. "Discrete-time Valuation of American Options with Stochastic Interest Rates." Review of Financial Studies, Vol. 8, 1995, pp. 193-232.
2.Chance, D.M., and D. Rich. "The Pricing of Equity Swaps and Swaption." Journal of Derivatives, Summer 1998, pp. 19-31.
3.Chang, Chung, and Yu. "Valuation and Hedging of Differential Swaps in a General Form," working paper, 1998.
3.Chang, Chung, and Yu. "Valuation and Hedging of Differential Swaps in a General Form," working paper, 1998.
5. ------. "Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claim Valuation." Econometrica, 60, 1992, pp. 77-105.
6.Jamshidian, F. "Price Differentials." RISK, 6, 7 (1993), pp. 48-51.
7.Jarrow, R., and S. Turnbull. Derivative Securities. Cincinnati: South-Western Publishing, 1996.
8. Litzenberger, R.H. "Swaps: Plain and Fanciful." Journal of Finance, July 1992, pp. 831-850.
9.Marshall, J.E., E. Sorensen, and A. Tucker. "Equity Derivatives: The Plain Vanilla Equity Swap and its Variants." Journal of Financial Engineering, 1992, pp. 219-241.
10.Rich, D. "The Mathematical Foundations of Barrier Option-Pricing Theory." Advances in Futures and Options Research, 1994, pp 267-311.
11.Wei, J.Z. "Valuing Differential Swaps." Journal of Derivatives, Spring 1994, pp. 64-76. |
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