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Financial Mathematics Seminar
Wednesday, October 3 rd 2007, 4:30 – 5:30 PM
University of Cincinnati , Braunstein Hall, Room 325
Srdjan Stojanovic will speak on
"FX Rates, FX Derivatives, and why the Japanese Yen falls when investors ignore risks ”
Abstract : We establish a practical, yet completely general mathematical model for foreign exchange rates (FXR), in the context of multidimensional, possibly incomplete, Itô SDE market/econometric models. A consistent, general theory of foreign exchange derivatives is established as well. One of the main consequences of the introduced FXR theory is the ability to quantify the significant effect of market risk aversion on foreign exchange markets. For example, we shall explain and quantify the empirically observed (see for example the “Financial Times” coverage by N. Dennis) phenomenon that: Japanese Yen falls sharply when investors ignore risks, and vice versa, it rises amid a general increase in risk aversion. Time permitting, some further examples, including models with stochastic interest rates, stochastic volatilities, etc., will be discussed as well.
Based on two Notes (submitted on June 5 th 2007):
· Stojanovic, Srdjan D., "Foreign Exchange Rates". Available at SSRN: http://ssrn.com/abstract=1010422· Stojanovic, Srdjan D., "Foreign Exchange Derivatives". Available at SSRN: http://ssrn.com/abstract=1010428