File Name: Exotic Options – Foreign Equity Struck in Domestic Currency
Location: Modeling Toolkit | Exotic Options | Foreign Equity Domestic Currency
Brief Description: Values the options on foreign equities denominated in foreign exchange currency while the strike price is in domestic currency
Requirements: Modeling Toolkit
Modeling Toolkit Functions Used: MTForeignEquityDomesticCurrencyCall, MTForeignEquityDomesticCurrencyPut
Foreign Equity Options Struck in Domestic Currency is an option on foreign equities in a foreign currency but the strike price is in domestic currency (see Figure 50.1). At expiration, assuming the option is in the money, its value will be translated back into the domestic currency. The Exchange Rate is the spot rate for domestic currency to foreign currency, the asset price is denominated in a foreign currency, and the strike price is in domestic currency.
Figure 50.1: Foreign equity with the strike in domestic currency