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2007•Journal of Hunan Institute of EngineeringRequires access

Foreign Equity Options on the Jump-Diffusion Model and Its Pricing

Xiangqun Yang

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Abstract

This paper studies the option pricing and foreign equity options on discontionuous random models when the exchange rate has different jumping scopes from the options.By using no-arbitrary pricing methodes and Feynman-Kac formula,we get the stochastic differential equation in which the options must be satisfied.Furthermore,when the options has random lives,by means of the similar stochastic analysis,the general pricing formula is obtained.

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What this paper is about

This paper studies the option pricing and foreign equity options on discontionuous random models when the exchange rate has different jumping scopes from the options.By using no-arbitrary pricing methodes and Feynman-Kac formula,we get the stochastic differential equation in which the options must be satisfied.Furthermore,when the options has random lives,by means of the similar stochastic analysis,the general pricing formula is obtained.

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Available abstract

This paper studies the option pricing and foreign equity options on discontionuous random models when the exchange rate has different jumping scopes from the options.By using no-arbitrary pricing methodes and Feynman-Kac formula,we get the stochastic differential equation in which the options must be satisfied.Furthermore,when the options has random lives,by means of the similar stochastic analysis,the general pricing formula is obtained.

Key concepts: Jump diffusion, Equity (law), Finite difference methods for option pricing, Valuation of options, Stochastic differential equation, Economics, Foreign exchange, Mathematical economics

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