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Pricing Foreign Exchange Exotic Options Under HJM Framework

Posted on:2011-02-04Degree:MasterType:Thesis
Country:ChinaCandidate:X GaoFull Text:PDF
GTID:2189360305487395Subject:Probability theory and mathematical statistics
Abstract/Summary:PDF Full Text Request
With the globalization of world economy development and the reformation of Our country, assets trade with abroad has been very prosperous, When the agents invest in the foreign capital market, because of the indetermination in exchange rate and the price of asset. Investors not only concerned about the asset price risk but also concerned about the risk of exchange rate movements. Since 1970s, after Bretton Woods system collapsed,fixed exchange rate system had been replaced by floating exchange system.How to know the risk of exchange rate in a right way? How to use the trade strategies and tools to avoid currency risk effectively has become a hot spot problem in the field of researching option pricing. In this paper, Under the assumption of complete market, according to the risk neutral pricing theory, Wielding martingale method of stochastic analysis, we discuss Foreign Exchange Exotic Options which is relevant to foreign bond futures price under Heath-Jarrow-Morton model.The main jobs we have did in this paper as follows:Chapter one is a foreword, introduces the evolution and development of option pric-ing theory, some achievements of foreign exchange options in Domestic and abroad,and introduces the Structure frame of his paper.Chapter two is preliminary knowledge and model introduces, having introduced some relevance Knowledge in stochastic analysis.such as martingale theory,Brown mo-tion;Ito stochastic integral; Ito formula and Girsanov theorem and so on. introduce the Pricing model and formula which will be need in this paper.Chapter three Foreign Exchange Barrier Options which is relevant to foreign bond futures price, and give closed-form expression for the arbitrage price of the Up-and-Out call option and Up-and-In call option.and also given the generalized formula of foreign exchange barrier options.Chapter four Foreign Exchange Reset Options which is relevant to foreign bond futures price, and give closed-form expression for the arbitrage price of the reset option and looking-back reset option, the explicit pricing formulas of the reset option and the looking-back reset option have been get.
Keywords/Search Tags:HJM model, martingale, foreign exchange options, Barrier Options, looking-back reset options
PDF Full Text Request
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