FX Option Performance

Specialeforsvar: Phillip Sanford Brigham

Title: FX Option Performance

Resume: A buy-and-hold option is similar to an insurance policy within the financial market. Insurance comes at a premium, and a strong effort is made in the litterature to determine the ”correct” premium. This thesis takes account for the similar study conducted in [Jessica James, 2015] while investigating whether this insurance has been worth the premium, by analysing a substantial amount of historical option data. From this we compare option premiums and payoffs and determine the average performance of foreign exchange options. We particularly investigate ATMF options on 18 currency pairs and find that the results depend on the specific market participants view on volatility. Additionally we investigate whether our finding are general or FX specfic by looking at four equity indices. 

Vejleder: Rolf Poulsen
Censor: Christoffer Kanstrup, Danske Bank