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Option value in domestic currency

Option value in foreign currency

where

where

S* = Underlying asset price in foreign currency.

X* = Delivery price in foreign currency.

r = Domestic risk free rate.

rf = Foreign risk free rate.

q = Instantaneous proportional dividend payout rate of the underlying asset.

E = Spot exchange rate in units of domestic currency per unit of foreign currency.

E* = Spot exchange rate in units of the foreign currency per unit of domestic currency.

= Volatility of the underlying asset.

= Volatility of the domestic exchange rate.

= Correlation between asset and the domestic exchange rate.

 

See Also

oX_Quanto( ) Function

oX_Quanto_Imp( ) Function

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