Valuation of Cross-Currency Equity Swaps Without Currency Risks

• Main Authors: Yi-Chein Chiang, 江怡蒨
• Other Authors: Len-Kuo Hu
• Format: Others
• Language: en_US
• Published: 1999
• Online Access: http://ndltd.ncl.edu.tw/handle/11242824012395000930

博士 === 國立政治大學 === 國際貿易學系 === 87 === Based on Dravid,Richardson, and Sun(1993), Amin and Bodurtha(1995), and Lin(1997), this thesis first derives the computable discrete-time pricing formulas for the cross-currency one-way and two-way equity swaps without currency risks, which are exotic financial derivatives used for cross-border investments without the exchange rate exposure. Under the cash flow approach, equity indexes and the exchange rate are modeled by the lognormal processes, and the interest rate processes follow the HJM model. The swap price is shown to depend on the volatilities of equity indexes, the interaction between the foreign equity index and the exchange rate, as well as the interest rate differential of two countries. It does ont depend on the volatility of the exchange rate. Finally, three cases illustrate the usage of these two exotic financial instruments.