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