Abstract: The problem of exchange rate option pricing is discussed based on  concrete exchange rate model.The effect of interest rate,purchasing power and account pring on exchange rate is considened.Using physical probability measure of price process and the principle of fair premium,and by an actuarial approach,the authors obtain the accurate pricing formula and put-call parity of European call and put option.The confidence interval of mean value is also obtained.

Key words: fair premium, option pricing, exchange rate