Publications [#294371] of Emma Rasiel

Papers Published

1. Bollen, NPB; Rasiel, E, The performance of alternative valuation models in the OTC currency options market, Journal of International Money and Finance, vol. 22 no. 1 (January, 2003), pp. 33-64, Elsevier BV [repository], [doi]
   (last updated on 2024/01/01)

   Abstract:
   We compare option valuation models based on regime-switching, GARCH, and jump-diffusion processes to a standard "smile" model, in which Black and Scholes (1973) implied volatilities are allowed to vary across strike prices. The regime-switching, GARCH, and jump-diffusion models provide significant improvement over a fixed smile model in fitting GBP and JPY option prices both in-sample and out-of-sample. The jump-diffusion model achieves the tightest fit. A time-varying smile model, however, provides hedging performance that is comparable to the other models for the GBP options. This result suggests that standard option valuation techniques may provide a reasonable basis for trading and hedging strategies. © 2003 Elsevier Science Ltd. All rights reserved.