Pricing of FX products - list rates

Sammanfattning: List rates is a product that provides clients with a fixed exchange rate for a fixed period of time, varying from a few minutes up to a few days. During this period, the customer can exercise trading at the fixed exchange rate multiple times. The aim of this study is to find a pricing model for List rates. Since the time period is specified and the rates can be exercised at any time before maturity, these can be viewed as American-style options on foreign currency. These are hard to price and numerical methods need to be used. The methodology used here is evaluated through Least Square Monte Carlo simulations and is applied to real historical market data.