The purpose of this paper is to price quanto interest-rate exchange options (QIREOs) based on a
practical and easy-to-use interest-rate model. According to the payoff structure of QIREOs, the
cross-currency LIBOR market model (CLMM), in which the initial LIBOR market model (LMM) is
extended from a single-currency economy to a cross-currency economy, is suitable to be adopted to
price four different types of quanto interest-rate exchange options in this article. Our pricing
formulae represent the general formulae in the framework of the CLMM. Hedging strategies are
also provided for practical implementation.
關聯:
Asian Economic and Financial Review 5(5), p.816-830
