Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOD
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Request a Demo
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Derivatives
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Request a Demo
  • Log in
The Journal of Derivatives

The Journal of Derivatives

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOD
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter
Article

The Fine Structure of Currency Returns
Implied in One-Touch Options

Ralf Buesser
The Journal of Derivatives Summer 2013, 20 (4) 78-98; DOI: https://doi.org/10.3905/jod.2013.20.4.078
Ralf Buesser
is an FX analyst at the Swiss National Bank in Zurich, Switzerland.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: ralf.buesser@alumni.unisg.ch
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Click to login and read the full article.

Don’t have access? Click here to request a demo 

Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600

Abstract

Under Black-Scholes assumptions, the returns process for an option’s underlying asset follows a logarithmic diffusion. The volatility parameter determines all aspects of risk. But Black-Scholes falls short of explaining real world returns, as well as real world option prices. Extensions to the model add stochastic volatility, possibly through a stochastic time-change, or jumps; or might even replace the diffusion entirely with an infinity of jumps of different sizes as in the variance gamma (VG) model. These models are flexible enough that they all can fit a sample of returns and price plain vanilla options quite well. This article brings into consideration another type of option contract: the one-touch option. The payoffs on these path-dependent contracts are determined not by the level of the underlying at expiration but by the extreme values along the price path from the initial date to expiration. The option pays when, and only if, the underlying hits a prespecified level at some point during its lifetime. Buesser notes that the various returns processes have quite different path behavior, so calibrating against one-touch options provides a significant source of additional information about the market dynamics investors expect. Comparing relative performance across models for the FX market, plain vanilla options on USDEUR and JPYUSD appear to embed a substantially different returns process than is implied by one-touch options.

  • © 2013 Pageant Media Ltd
View Full Text

Don’t have access? Click here to request a demo

Alternatively, Call a member of the team to discuss membership options

US and Overseas: +1 646-931-9045

UK: 0207 139 1600

Log in using your username and password

Forgot your user name or password?
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Derivatives: 20 (4)
The Journal of Derivatives
Vol. 20, Issue 4
Summer 2013
  • Table of Contents
  • Index by author
Print
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Derivatives.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
The Fine Structure of Currency ReturnsImplied in One-Touch Options
(Your Name) has sent you a message from The Journal of Derivatives
(Your Name) thought you would like to see the The Journal of Derivatives web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
The Fine Structure of Currency Returns
Implied in One-Touch Options
Ralf Buesser
The Journal of Derivatives May 2013, 20 (4) 78-98; DOI: 10.3905/jod.2013.20.4.078

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
The Fine Structure of Currency Returns
Implied in One-Touch Options
Ralf Buesser
The Journal of Derivatives May 2013, 20 (4) 78-98; DOI: 10.3905/jod.2013.20.4.078
del.icio.us logo Digg logo Reddit logo Twitter logo CiteULike logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
    • Abstract
    • THE RISK-NEUTRAL DYNAMICS OF CURRENCY PAIRS
    • CALIBRATING THE MODELS TO THE VANILLA MARKET
    • EVIDENCE FROM ONE-TOUCH OPTIONS
    • CONCLUSION
    • APPENDIX A
    • APPENDIX B
    • APPENDIX C
    • APPENDIX D
    • ENDNOTES
    • REFERENCES
  • Info & Metrics
  • PDF (Subscribers Only)
  • PDF (Subscribers Only)

Similar Articles

Cited By...

  • No citing articles found.
  • Google Scholar

More in this TOC Section

  • Editor’s Letter
  • Editor’s Letter
  • Interviews with Researchers Who Started Their Career in Physics but Moved to Finance
Show more Article
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • Home
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Log In
  • Update your profile
  • Give us your feedback

© 2021 Pageant Media Ltd | All Rights Reserved | ISSN: 1074-1240 | E-ISSN: 2168-8524

  • Site Map
  • Terms & Conditions
  • Privacy Policy
  • Cookies