how to price a quanto digital
Posted: January 25th, 2006, 9:41 am
by Squal
Hi,Could some tell me how to price a quanto digital.Regards,
how to price a quanto digital
Posted: January 25th, 2006, 12:48 pm
by Buba75
It should(!) work just like all other quantos: just change your cost of carry. In detail: as the formula for the digitals is just the last part of the BS formula, just use the last part of the corresponding quanto formula: c=K*exp(-r*T)*N(d)where d=(ln(S/X)+(rf-q-corr*sigma*sigmaFX+sigma^2/2)*T)/(sigma*sqrt(T))