The Quanto Option's Pricing Under The Stochastic Interest Rates

With the globalization of world economy development and the promotion of information technology, the globalization of the investment rate has gradually accelerated. Embody the characteristics of foreign investment in the market-currency derivative securities increasingly preferred by investors. The quanto options, its underlying asset is traded in the local country; its derivatives is traded in foreign transactions denominated in foreign currencies. They rely not only on the underlying assets of one country, but also by the effect of exchange rate changes. The real yield is used by another country's currency. Investors not only are concerned about the stock price risk but also concerned about the risk of exchange rate movements. Therefore, investors can also hedg price risk and foreign exchange risk, or consider avoiding one of the risks. As quanto options not only with a country linked to underlying assets, but also to the two country's interest rates, when foreign exchange rate rise and the local currency devaluat, the domestic residents of a decline in the demand for foreign exchange, the currency relatively abundant, domestic interest rates will show steady downward trend; Conversely, domestic interest rates will show an upward trend. Therefore, investors'yield will be affected by the proceeds of domestic interest rates and the impact of changes. So, classic Black-Scholes pricing model can not be directly applied to the problem of pricing options. The article based on the risk-neutral's hypothesis, we use the non-arbitrage analysis and the theory of stochastic analysis,concera when interest rates have to meet Hull & White interest rate model the different types of currency option pricing formula. The article's main results are as follows :Where WhereWhereWhere...