A functional ARMA-GARCH model for predicting the value-at-risk of the EURUSD exchange rate is introduced. The model implements the yield curve differentials between EUR and the US as exogenous factors. Functional principal component analysis allows us to use the information of basically the...

Since their introduction, quanto options have steadily gained popularity. Matching Black-Scholes-type pricing models and, more recently, a fat-tailed, normal tempered stable variant have been established. The objective here is to empirically assess the adequacy of quanto-option pricing models....