Assuming the CNY/USD exchange rate is 7.0 today. CNY Interest Rate is 5% USD Interest Rate is 0.5% Volatility of CNY/USD is 10% a year. Thus the 1 year forward is 7.32 (1USD = 7.32 CNY). Use the option calculator to calculate the value of a USD call/CNY Put option with strike of 7.7 and a USD put option/CNY Call option with strike of 7.00, this structure is called a collar. How is buying a call and selling a put with the strikes above compared to buying a USD forward strike at 7.00? How much money will a company save by doing the collar? If you are to construct a zero cost collar, what will the put price be? Will you conclusion change if volatility is 20% instead of 10% a year? 7.7 7.00