On Hedge Parameters of currency Options

Youngna Choi, Yeomin Yoon

Research output: Contribution to journalArticlepeer-review


Currency options differ from stock options because there are two (domestic and foreign) interest rates involved. In this paper, we explicitly derive the Black-Scholes option pricing formula for currency options. The partial derivatives of the option price, also known as hedge parameters, give us insight into the effect of option variables on the option's cost. We derive and mathematically analyze the hedge parameters to interpret their role and meaning in financial securities. This paper is expository in style about currency options for audiences of a wide range, including students majoring in mathematical finance at business schools.

Original languageEnglish
JournalInternational Journal of Business
Issue number1
StatePublished - 2022


  • Currency option
  • Geometric brownian motion
  • Hedge parameter


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