Electronic Resource
Oxford, UK and Boston, USA
:
Blackwell Publishers Ltd
European financial management
4 (1998), S. 0
ISSN:
1468-036X
Source:
Blackwell Publishing Journal Backfiles 1879-2005
Topics:
Economics
Notes:
In general, the risk of a financial instrument on a future valuation date depends on several stochastic variables. In the case of a currency swap, its value on a future date, can be modelled as a function of five stochastic variables. These represent the factors that determine the term structure of interest rates in the two currencies, and the foreign exchange rate between the currencies. The joint-probability distribution of the relevant variables on the horizon date is approximated by a multivariate-binomial distribution. The proposed methodology provides a fast and flexible alternative to Monte-Carlo simulation of the swap value. The distributions of value produced by the method can be employed to assist with both market and credit risk management.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1111/1468-036X.00051
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