Israelis commonly hold substantial foreign currency balances at home. This paper examines the phenomenon of these "closet dollars." We show that closet dollars are attractive only if there exists a positive probability that domestic deposits will pay negative dollar rates of return. If such...

In this paper we discuss the significant computational simplification that occurs when option pricing is approached through the change of numeraire technique. The original impetus was a recently published paper (Hoang, Powell, Shi 1999) on endowment options; in the present paper we extend these...