Question
An investor in Hong Kong considers buying a European put on Euro. The risk-free interest rates in Hong Kong and Europe are 2% and 1%
An investor in Hong Kong considers buying a European put on Euro. The risk-free interest rates in Hong Kong and Europe are 2% and 1% per annum, respectively. The spot exchange rate is 9.20 Hong Kong Dollar (HKD) per Euro (EUR). The put has a strike price of 9.30 HKD per EUR and will expire three years later. Find the range of the put prices that do not allow any arbitrage.
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Personal Finance
Authors: Jeff Madura
6th Edition
0134082915, 9780134082912
