4 Pages Posted: 11 Sep 2007
Date Written: June 5, 2007
We establish general theory of foreign exchange derivatives (FXD), for multidimensional, possibly incomplete, Itô SDE market/econometric models. The established theory is consistent with the one of foreign exchange rates (FXR) introduced by the author in a previous note. A very simple example is presented as well.
Keywords: Foreign exchange, SDE, PDE, derivative pricing and hedging, portfolio optimization, risk aversion
JEL Classification: F31, G13, D52
Suggested Citation: Suggested Citation