Analytic formula and diffusion approximations for Pricing FX options under the Heston Model and CIR interest rates.

Speaker: Rehez Ahlip

Affiliation: University of Western Sydney

Time: Monday 30/04/2012 from 14:00 to 15:00

Venue: Access Grid UWS. Presented from Parramatta (EB.1.32), accessible from Campbelltown (26.1.50) and Penrith (Y239).

Abstract: In this talk we consider pricing Foreign exchange options under stochastic volatility and stochastic interest rates. The focus of this talk will be two key results, A closed form expression for the price of a European Call and the recombining binomial tree approach for approximating the price. The talk will include derivation of Black-Scholes partial differential equation and solution under the Black-Scholes framework.

Biography: Rehez Ahlip is a Senior Lecturer with the School of Computing, Engineering and Mathematics and a member of the UWS Centre for Research in Mathematics. His research is in the area of financial mathematics that defines pricing and hedging of derivatives. For the last 7 years Rehez has been collaborating with Professor Marek Rutkowski from The University of Sydney on developing mathematical models for pricing of foreign exchange options of increasing sophistication. As the result of this research Rehez has published a number of well received journal papers.