Suppose that USD-sterling spot and forward exchange rates are as follows: Spot 1.6080 90-day forward 1.6056 180-day
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Suppose that USD-sterling spot and forward exchange rates are as follows:
Spot 1.6080 90-day forward 1.6056 180-day forward 1.6018 What opportunities are open to an arbitrageur in the following situations?
(a) A 180-day European call option to buy $1 for $1.57 costs 2 cents.
(b) A 90-day European put option to sell $1 for $1.64 costs 2 cents.
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