Option Pricing Based On Foreign Exchange Rate And Its Numerical Simulation

Foreign exchange option is an option contract with the foreign exchange rate as the underlying asset.When the foreign exchange rate changes dramatically,the buyer of foreign exchange option can gain profits by exercising the option to make up for the huge losses caused by foreign exchange risk to enterprises or individuals.It has a better risk hedging function.According to the observation of actual data,in the real market,the change of exchange rate is always within a certain range.Although in the period of changeable international situation and unstable financial development,the change of exchange rate will not exceed a certain value.Therefore,it is more practical to limit the exchange rate within a certain range when studying related issues of foreign exchange options.Based on this fact,two new options pricing models based on foreign exchange rate are constructed in this paper,and the return function is added with the qualification conditions.By adding the exchange rate indicative function,the exchange rate change is limited in a range for research.Using the risk-neutral principle and the martingale pricing theory,the pricing problems of geometric Asian options and quanto options under this model are discussed.The main research results are as follows:First,establish the geometric Asian option model with the exchange rate range indication function,deduce the pricing formula according to the income function,and calculate the option price combined with the real exchange rate data,and finally write the Matlab program for empirical analysis.Second,establish the quanto option model with the exchange rate range indication function,deduce the pricing formula according to the return function,write a program in Matlab to bring in the real exchange rate data in recent years to analyze its price process and sensitivity,and summarize the impact of exchange rate changes on the option price.