Foreign Exchange Intervention by the Bank of Japan: Bayesian Analysis Using a Bivariate Stochastic Volatility Model

2006 ◽  
Vol 25 (2-3) ◽  
pp. 425-451 ◽  
Author(s):  
Michael Smith ◽  
Andrew Pitts
Keyword(s):  
Bayesian Analysis ◽  
Stochastic Volatility ◽  
Foreign Exchange ◽  
Stochastic Volatility Model ◽  
Foreign Exchange Intervention ◽  
Volatility Model ◽  
Bank Of Japan

A STOCHASTIC VOLATILITY MODEL FOR RISK-REVERSALS IN FOREIGN EXCHANGE

2009 ◽  
Vol 12 (06) ◽  
pp. 877-899 ◽  
Author(s):  
CLAUDIO ALBANESE ◽  
ALEKSANDAR MIJATOVIĆ
Keyword(s):  
Stochastic Volatility ◽  
Foreign Exchange ◽  
Continuous Time ◽  
Efficient Algorithms ◽  
Stochastic Volatility Model ◽  
Foreign Exchange Markets ◽  
Local Volatility ◽  
Volatility Model ◽  
Exchange Markets

It is a widely recognized fact that risk-reversals play a central role in the pricing of derivatives in foreign exchange markets. It is also known that the values of risk-reversals vary stochastically with time. In this paper we introduce a stochastic volatility model with jumps and local volatility, defined on a continuous time lattice, which provides a way of modeling this kind of risk using numerically stable and relatively efficient algorithms.

FOREIGN EXCHANGE OPTIONS UNDER STOCHASTIC VOLATILITY AND STOCHASTIC INTEREST RATES

2008 ◽  
Vol 11 (03) ◽  
pp. 277-294 ◽  
Author(s):  
REHEZ AHLIP
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
Stochastic Volatility ◽  
Foreign Exchange ◽  
Stochastic Volatility Model ◽  
Stochastic Interest Rates ◽  
Volatility Model ◽  
Stochastic Interest ◽  
The Exchange Rate ◽  
Inversion Techniques

In this paper, we present a stochastic volatility model with stochastic interest rates in a Foreign Exchange (FX) setting. The instantaneous volatility follows a mean-reverting Ornstein–Uhlenbeck process and is correlated with the exchange rate. The domestic and foreign interest rates are modeled by mean-reverting Ornstein–Uhlenbeck processes. The main result is an analytic formula for the price of a European call on the exchange rate. It is derived using martingale methods in arbitrage pricing of contingent claims and Fourier inversion techniques.

Bayesian Analysis of a Threshold Stochastic Volatility Model

2016 ◽  
Vol 35 (5) ◽  
pp. 462-476 ◽  
Author(s):  
Tony S. Wirjanto ◽  
Adam W. Kolkiewicz ◽  
Zhongxian Men
Keyword(s):  
Bayesian Analysis ◽  
Stochastic Volatility ◽  
Stochastic Volatility Model ◽  
Volatility Model
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