Question
Consider now the two options with the same four-month maturity (call on Euro) Strike 1: 1.4472 AUD/Euro (at-the-money fwd), premium 0.0308 per Euro Strike 2:
Consider now the two options with the same four-month maturity (call on Euro)
Strike 1: 1.4472 AUD/Euro (at-the-money fwd), premium 0.0308 per Euro
Strike 2: 1.4577 AUD/Euro (50 pips out-of-the-money (OTM)), premium 0.0264 per Euro
Explain why the premium of one call is larger than that of the other call
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Finance Applications And Theory
Authors: Marcia Cornett, Troy Adair, John Nofsinger
5th Edition
1260013987, 9781260013986
