The Application Of Martingale Method In Dual Currency Deposit Pricing

With the rapid economic growth in China and the fast wealth increscent in Chinese family, financial planning has become one of the most popular topics in Chinese financial market. On one hand, people have got more awareness and feel more needs about financial planning. On the other hand, there have been more and more institutions engaging in providing financial services and financial products in the market. At the same time, with the opening-up of china's financial market getting much deeper, more financial institutions enter into China's financial market from overseas. Those bring a financial market booming to china.In various kinds of financial products, Dual Currency Deposit becomes more and more popular for its attractive interest rates, no foreign exchange fee and wide range of variation. But at the mean time there exists underlying risk. So it is necessary for the investor to estimate the risk of the Dual Currency Deposit produced before investment. In this paper, we introduce the following method to evaluate the value of the Dual Currency Deposit. Firstly, we suppose the currency rate follows the Geometry Brown Model. We use martingale method to price the Dual Currency Deposit. Then, we evaluate the parameters in the above model and do some simulation with Monte Carlo to estimate future currency rate, thus to calculate the real value of the Dual Currency Deposit. With this method, we can evaluate Dual Currency Deposit and give the potential risk. We have also done the positive analysis to prove its reasonableness.