cash-or-nothing in FX

amit7ul · January 18th, 2008, 8:48 am

consider a something-or-nothing kind of option on uderlying EUR/USD. am i right in saying thatif notional is specified in USD then its a cash-or-nothing option and its BSM price in dollars is notional*e(-r_USD*time)*N(d2)and if notional is specified in EUR then its a asset-or-nothing option and its BSM price in dollars is notional*e(-r_EUR*time)*N(d1)*current exchange rate please correct me and tell me where am i wrong.

zxem · January 19th, 2008, 7:51 am

Want to know too.

amit7ul · January 21st, 2008, 2:50 pm

my reasoning was price in the first case in dollars is exp(-r.t)*E(s_T>k) and price in latter case in dollars is exp(-r.t)*E(s_T | s_T>k)