The Pricing Of Option With Exchange Rate

In this dissertation, the evolution and development of option pricing theory is introduced firstly. Then some basic theory about stochastic analysis and some concept on financial market are presented. And European contingent claim can be priced by martingale method. Finally, the option with exchange rate can be defined and priced well.Chapter 1 is devoted to the evolution and development of option pricing theory: tradition--al option pricing models and Black-Scholes option pricing model. In addition, some achievem--ents on theory and aboard are presented.Chapter 2 introduces the basic knowledge of option pricing: basic concept and theories about stochastic analysis such as martingale theory, Brown motion and Ito stochastic integral, Ito formula and Girsanov theorem and so on.Chapter 3 introduces the basic knowledge and theory on the financial market.In the second section, by martingale method ,European contingent claim can be priced well. In the end, not only the original method on deriving Black-Scholes formula is introduced, but also the martinga--le method is presented too. Then Black-Scholes modified model are described.Chapter 4 discusses the model of option with exchange rate basing on European call option. This call option is studied under different currenty measurement. Then the pricing of option with exchange rate is reasearched by provising a exchange rate process. It will be considered in different condition:(a) Capital is independent of exchange rate.(b) Capital is related to exchange rate.