Valuation of Guarantees Set Relative to Cross-Currency Stochastic
Rates of Return

ASIA unversity > 管理學院 > 財務金融學系 > 會議論文 > Item 310904400/63695

Please use this identifier to cite or link to this item: http://asiair.asia.edu.tw/ir/handle/310904400/63695

Title:	Valuation of Guarantees Set Relative to Cross-Currency Stochastic Rates of Return
Authors:	Tsung-Yu Hsieh, Chi-Hsun Chou,Son-Nan Chen
Contributors:	Department of Banking and Finance, Tamkang University,Department of Management, Fo Guang University,Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University
Keywords:	Stochastic, Rate of Return Guarantee, Cross-currency, Interest rate, LIBOR Market Model
Date:	2012
Issue Date:	2013-08-07 01:27:33 (UTC+0)
Publisher:	Department of Banking and Finance, Tamkang University,Department of Management, Fo Guang University,Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University
Abstract:	We derive the pricing formulas for guarantees whose guaranteed minimum rates of return are set relative to cross-currency stochastic rates of return, “GCSRs” for short, via a cross-currency framework. GCSRs are often embedded in contracts which include life and pension insurance policies, guaranteed investment contracts and index-linked bonds, etc. The valuation of such guarantees has not been investigated in previous literature regarding guarantees. Our research finds that valuing GCSRs via a single-currency framework which is adopted in previous research on guarantees causes a significant underestimation of GCSRs under both maturity and multi-period guarantee. The underestimation of multi-period guarantee is much more significant than that of maturity guarantee. As a result, the pricing formulas derived in our research are more suitable, tractable and feasible for practice than those in previous relevant literature.
Relation:	2012中部學術財金研討會論文發表
Appears in Collections:	[財務金融學系] 會議論文

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