The Effect Of Exchange Rate Risk To European Call Option Pricing

In this dissertation,the evolution and development of option pricing theory is introduced firstly.Then some basic knowledge about option pricing are described,At last the effect of exchange rate to the European option pricing is provided.Chapter 1 is devoted to the evolution and development of option pricing theory: traditional option pricing models and Black-Scholes option pricing model.In addition,some achievements on the theory domestic and aboard are presented.Chapter 2 Introduces some basic knowledge about option pricing:basic concepts and theories about probability and stochastic process theory such as martingale, Brownian motion and Ito stochastic integral,Ito formula and Girsanov theory.Chapter 3 discusses the pricing and hedging in the Black-Scholes model and the jump-diffusion model.Chapter 4 discusses the effect of exchange rate risk to European call option pricing, we study the European call option pricing in different currency, and we take the exchange rate process to the pricing.The exchange rate and the stock market can be independent or correlated, in each condition, We compare the price which includes exchange rate process and the price converted to another directly by exchange rate,and we find in each condition they are equal.