You use the following information to construct a two-period binomial forward tree for modeling the movements of

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You use the following information to construct a two-period binomial forward tree for modeling the movements of the dollar-euro exchange rate:

(i) The current dollar-euro exchange rate is $1.50/AC.

(ii) The volatility of the exchange rate is 20%.

(iii) The continuously compounded risk-free interest rate on dollars is 4%.

(iv) The continuously compounded risk-free interest rate on euros is 5%.

Calculate the price of a 6-month $1.80-strike dollar-denominated American put option on euros.

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Derivative Pricing

ISBN: 9780367734213

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Authors: Ambrose Lo

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Question Posted: Nov 22, 2023 08:05 AM

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You use the following information to construct a two-period binomial forward tree for modeling the movements of

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Derivative Pricing

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