A note on forward price and forward measure

Ren Raw Chen, Jingzhi Huang

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

The forward measure is convenient in calculating various contingent claim prices under stochastic interest rates. We demonstrate that caution needs to be drawn when the forward measure is used to price contingent claims that involve multiple cash flows. We also derive partial different equations for the forward price to demonstrate how forward contracts can be used for dynamic hedging and how hedges can be conducted if the payoff of a contingent claim depends on the forward price.

Original languageEnglish (US)
Pages (from-to)261-272
Number of pages12
JournalReview of Quantitative Finance and Accounting
Volume19
Issue number3
DOIs
StatePublished - Jan 1 2002

Fingerprint

Forward price
Forward measure
Contingent claims
Dynamic hedging
Hedge
Stochastic interest rates
Cash flow
Forward contracts

All Science Journal Classification (ASJC) codes

  • Accounting
  • Business, Management and Accounting(all)
  • Finance

Cite this

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A note on forward price and forward measure. / Chen, Ren Raw; Huang, Jingzhi.

In: Review of Quantitative Finance and Accounting, Vol. 19, No. 3, 01.01.2002, p. 261-272.

Research output: Contribution to journalArticle

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