Final Project
We would like to buy a contract paying at maturity T the amount in USD: max0,✓S(T) k◆.✓k0 L(T ,T ,T)◆
S(0) L(0,T ,T)
• S(t) the Nikkei-225 spot price quantoed from JPY into USD
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• L(t,T ,T) is the 3-month USD LIBOR rate between T and T • is a period of 3-month (0.25 years)
• T the expiration date (e.g. 3 year)
• k , k0 given relative strike prices (e.g. both could be 1 or …)
Provide a pricing routine (e.g. Python script) calculating the price of this contract, taking as inputs: the deal terms (T, , k,k0) and the relevant mar- ket data (rates, volatilities, spot prices ….).
Explain your precise assumptions and methodology clearly in an accompa- nying write-up.
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