Abstract

http://ssrn.com/abstract=788645
 
 

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The Main Risks of an FX Options Portfolio, Some Untimely Considerations of an Option Trader


Antonio Castagna


Iason Ltd.

August 23, 2005


Abstract:     
In this document we study the risks of an FX options portfolio; we will focus on which, we think, are the main sources of risk. Besides, we analyze also the relationships between the underlying assets' price and the (possibly stochastic) volatility. Some practical suggestions will be proposed to calculate the total (combined asset's price-volatility) VAR of a portfolio, taking into account the smile and the skew of the volatility matrix by means of an Uncertain Volatility Model.

Number of Pages in PDF File: 19

Keywords: FX, option, stochastic volatility, uncertain volatiltiy, smile, VAR

JEL Classification: G13

working papers series





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Date posted: August 29, 2005  

Suggested Citation

Castagna, Antonio, The Main Risks of an FX Options Portfolio, Some Untimely Considerations of an Option Trader (August 23, 2005). Available at SSRN: http://ssrn.com/abstract=788645 or http://dx.doi.org/10.2139/ssrn.788645

Contact Information

Antonio Castagna (Contact Author)
Iason Ltd. ( email )
7th Floor, Hume House
Dublin, 4
Ireland
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