A Cross-Currency Lévy Market Model

Eberlein, Ernst Wilhelm; Koval, Nataliya

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%T A Cross-Currency Lévy Market Model
%A Eberlein, Ernst Wilhelm
%A Koval, Nataliya
%J Quantitative Finance
%N 6
%P 465-480
%V 6
%D 2006
%K Foreign Exchange Markets; Non-Gaussian Option Pricing; Interest Rate Derivatives; LIBOR Market Models; Fixed Income Derivatives; Swap Pricing; Derivative Pricing Models; Levy Process
%= 2011-03-15T10:04:00Z
%~ http://www.peerproject.eu/
%> https://nbn-resolving.org/urn:nbn:de:0168-ssoar-220866
%X The Lévy Libor or market model which was introduced in Eberlein and Özkan (2005) is extended to a multi-currency setting. As an application we derive closed form pricing formulas for cross-currency derivatives.  Foreign caps and floors, cross-currency swaps and quanto caplets are studied in detail. Numerically efficient pricing algorithms based on bilateral Laplace transforms are derived. A calibration example is given for a two-currency setting (EUR, USD).
%C GBR
%G en
%9 journal article
%W GESIS - http://www.gesis.org
%~ SSOAR - http://www.ssoar.info