The Price Of RMB To Foreign Currency Option

With the globalization of the world economy, problems about foreign exchange and derivativeproducts and it’s pricing are becoming more and more attentional in modern financial theory.Especially since Chinese formally joined the WTO, financial market of China will open further, all ofthe financial activities must be carried out in accordance with the international rules of the market, butChina’s financial market participants of the market has relatively scarce experience of riskmanagement of financial derivatives and poor ability of resisting financial risks.The exchange ratesystem reform in July,2005,China implemented a floating exchange rate system, the RMB exchangerate is no longer pegged to the dollar on alone, and they have become which basis of market supplyand demand, reference to a basket of currencies up regulation and managed floating exchange ratesystem. This exchange rate system has expanded the range of RMB exchange rate to a certain extent,the risk of economic activities’ main part need appropriate financial tools to avoid exchange ratefluctuations in the foreign exchange market environment. As a kind of buying and selling foreignexchange assets which based on the right choice,foreign exchange option occupy a certain position inthe financial market, through financial derivative products transactions and investors can avoidexchange rate risks and benefits through financial derivative products transactions.Foreign exchange option emerged on the western countries, the research on it by China scholarshave generally focused on the risk aversion function as well as the pricing mode before which as aformal investment products to enter the Chinese market,and the thorough research in this aspect isvery necessary based on the present situation. The main part of this price of two yuan on the foreignexchange option: Pricing and price risk analysis on the base of the previous experiments. We mainlyintroduces Black-Scholes foreign exchange option pricing formula which applied to foreign exchangeoption pricing methods and improved more in line with the financial market development Brownmotion of pricing European foreign currency options under these two kinds of pricing methods inpricing research, and carries on the comparative analysis, obtains the calculation mode of China’sfinancial market suitable; in the risk research we used the renminbi to the VaR method of foreigncurrency option prices to calculate, to quantify the risk of currency options.