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Working Paper

Noise Traders' Trigger Rates, FX Options, and Smiles

Kiel Working Papers, 970
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Authors

  • Pierdzioch
  • C.

Publication Date

JEL Classification

F31 G13

Key Words

Foreign Currency Options

GARCH model

Implicit Price Barriers

Noise trading

Volatility Smile

A contingent claims valuation model which allows to highlight the implications of program trading in spot markets for the pricing of European-style foreign currency options and for the volatility strike structure implicit in these contracts is devoloped.

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