<t>Agreed.If I consider the undelying of this option to be S(t) = J(t)/k(t) [the Yen-denominated stock divided by the Yen-$ conversion factor], which unlike J(t) is not a physical quantity, then I must find the vol. of S(t).Clearly, there is no problem if I am comfortable with using historical vol, ...

<t>Suppose in a BS world I write an ATM option on a Japanese stock that fulfills all of the BS requirements, but I denominate the option in dollars.That is, suppose the yen:$ conversion factor (k) is 100, and the Japanese stock (J) trades at 10,000 yen. Then, S(0) = K = J(0)/k(0) = $100, and S(t) = ...

<t>QuoteI think it’s no coincidence that currency pegs have worked only in countries with strong, German-style banking systems. I prefer British-American style banks, which I think result in more dynamic and successful economies, but they cannot match the German system for currency trust. Aaron, app...