Semi-static hedging for certain Margrabe type options with barriers
نویسنده
چکیده
It turns out that a slightly generalised Margrabe formula exhibits symmetry properties leading to semi-static hedges of rather general options in the bivariate Black-Scholes economy. In order to increase the liquidity of the used hedging instruments for currency options, the duality principle can be used to set up the hedges in a foreign market by using only European vanilla options sometimes along with a riskless bond. Since the semi-static hedges in the Black-Scholes economy are exact, a closed form valuation formula of a certain weighted barrier swap-option can be easily derived.
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