eprintid: 10195326 rev_number: 13 eprint_status: archive userid: 699 dir: disk0/10/19/53/26 datestamp: 2024-08-02 10:53:47 lastmod: 2025-01-28 15:45:42 status_changed: 2025-01-28 15:45:42 type: article metadata_visibility: show sword_depositor: 699 creators_name: Hok, Julien creators_name: Tse, Alex title: FX Open Forward ispublished: pub divisions: UCL divisions: B04 divisions: C06 divisions: F59 keywords: FX Open Forward, American derivative, Optimal stopping, Free-boundary problem note: This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed,or built upon in any way. The terms on which this article has been published allow the posting of the Accepted Manuscript in a repository by the author(s) or with their consent. abstract: FX Open Forward is a derivative instrument where the contract holder has the obligation to purchase a specific amount of foreign currency under a fixed exchange rate by the contract expiry date. In contrast to a traditional forward contract, a distinctive feature of FX Open Forward is that the timing and notional size of the currency conversion can be freely chosen by the contract holder. Under a Black–Scholes model where interest rates can be negative, we provide a complete solution of the early exercise strategy of an FX Open Forward. When domestic rate and foreign rate are both positive (negative), the full contractual notional should be exercised when the spot FX level is sufficiently high (low). Unlike American options, the optimal waiting region of FX Open Forward is always connected even when interest rates are negative date: 2024-08-27 date_type: published official_url: https://doi.org/10.1080/14697688.2024.2388802 oa_status: green full_text_type: pub language: eng primo: open primo_central: open_green verified: verified_manual elements_id: 2302336 doi: 10.1080/14697688.2024.2388802 lyricists_name: Tse, Alex lyricists_id: ASLTS89 actors_name: Tse, Alex actors_id: ASLTS89 actors_role: owner full_text_status: public publication: Quantitative Finance volume: 24 number: 8 pagerange: 1037-1055 citation: Hok, Julien; Tse, Alex; (2024) FX Open Forward. Quantitative Finance , 24 (8) pp. 1037-1055. 10.1080/14697688.2024.2388802 <https://doi.org/10.1080/14697688.2024.2388802>. Green open access document_url: https://discovery.ucl.ac.uk/id/eprint/10195326/1/Tse_FX%20Open%20Forward.pdf