Working Paper

Noise Traders' Trigger Rates, FX Options, and Smiles

Author

  • Christian Pierdzioch
Publication Date

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.

Info

JEL Classification
F31, G13

Key Words

  • Foreign Currency Options
  • GARCH model
  • Implicit Price Barriers
  • Noise trading
  • Volatility Smile