Abstract
Uncertain differential equation is an important tool to deal with the currency exchange rate problems in uncertain environment. Considering the fierce drifts of the exchange rate, this paper proposes a currency model by using the uncertain differential equation with jumps. The uncertainty distribution of the exchange rate is calculated, based on which a European currency option pricing formula for the currency model is derived. In order to calculate the currency option numerically, an algorithm is designed, and its effectiveness and efficiency are illustrated via some numerical experiments.
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