Risk Measure of FX Options Based on Delta-Gamma-Theta Model
CHEN Rong-da(School of Finance,Zhejiang University of Finance & Economics,Hangzhou 310012,China)
In this paper we introduce finance parameter: Delta, Gamma, Theta. And develop approximate expression of the change in the value of FX options into Delta-Gamma-Theta model. Then we use Monte Carlo approach and Cornish-Fisher approach to compute VaR value of portfolio of FX options. Moreover, we find the gained VaR value using Cornish-Fisher approach is near to the gained VaR value using Monte Carlo approach, and the Delta-Gamma-Theta Model using the two approaches is evidently better than the Delta-Normal model. However, the Cornish-Fisher approach is simple and quick in the process of computation, and the Monte Carlo approach is burdensome in the process of computation and occupies long time.