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8. (13 points) Consider the following 2-period binomial tree for the $ / foreign exchange rate (X), i.e. the spot price of l in 's.
8. (13 points) Consider the following 2-period binomial tree for the $ / foreign exchange rate (X), i.e. the spot price of l in 's. Xuu = 1.815 x = 1.65 Xa = 1.5 Xud/ du = 1.185 Xi = 1.35 Xdd = 1.215 Assume the periodic, continuously compounded domestic interest rate is rs = 2%, and the foreign interest rate is re = 3%. Find the price of an American, at-the-money, 2-period call option. 8. (13 points) Consider the following 2-period binomial tree for the $ / foreign exchange rate (X), i.e. the spot price of l in 's. Xuu = 1.815 x = 1.65 Xa = 1.5 Xud/ du = 1.185 Xi = 1.35 Xdd = 1.215 Assume the periodic, continuously compounded domestic interest rate is rs = 2%, and the foreign interest rate is re = 3%. Find the price of an American, at-the-money, 2-period call option
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