| Summary: | 碩士 === 輔仁大學 === 金融研究所 === 92 === Without the extensive markets and plentiful resources, Taiwan is highly depended on the international trade. However, companies involving in the international trade are often reluctant to explore risks, such as the risk caused by the currency volatility. Therefore, companies involving the international business can often protect themselves from the currency risks by forward currency, currency future, NDF, as well as currency option. Although the currency option only can be traded over-the-counter, the volume of the currency option is quite large. But the option premium is not low enough to attract the public so the most traders are big-sized companies.
The purpose of this paper is to design the currency instalment option, which people can buy by instalment plan. Besides, we would like to investigate the advantages of the currency instalment option by simulation. Moreover, we analyze the pricing by binomial tree model, trinomial tree model, monte carlo simulation, and the analytical solution. The results are as follow:
1.If investors, after buying the currency instalment options, face the extremely out-the-money options with very low time values or don’t want to hold the currency instalment options, the currency instalment options can save some premiums for the buyers.
2.It is very useful to price the currency instalment options if we use the binomial tree model and the trinomial tree model. In addition, the trinomial tree model is better than the binomial tree model in the stability and efficiency of the pricing.
3.Monte carlo simulation that pricing the multi-term currency instalment options is not appropriate.
4.Analyzing Gamma by the binomial tree model and the trinomial tree model could cause the Gamma to keep jumping. It is why the figure illustrated Gamma won’t be smooth.
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