Pricing and hedging problem of foreign currency option with higher borrowing rate |
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| Authors: | Li Chen Zongyuan Huang Zhen Wu |
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| Institution: | 11018. Department of Mathematics, China University of Mining Technology, Beijing, 100083, China
21018. School of Mathematics, Shandong University, Jinan, 250100, China
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| Abstract: | The pricing and hedging problem of foreign currency option with higher borrowing rate is discussed. The method to obtain the price and hedging portfolio of currency option is based on backward stochastic differential equations (BSDE for short) theory and Malliavin calculus technique. The sensitivity of the model parameters is also considered and some numerical simulations are given to illustrate our conclusion. |
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