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.
Asian Economic and Financial Review 5(5), p.816-830