Question
Pricing Currency Options on the Euro A U.S.-based firm wishing to buy A European firm wishing to buy or sell euros (the foreign currency) or
Pricing Currency Options on the Euro A U.S.-based firm wishing to buy A European firm wishing to buy or sell euros (the foreign currency) or sell dollars (the foreign currency) Variable Value Variable Value Spot rate (domestic/foreign) S0 $ 1.4730 S0 0.6789 Forward rate (domestic/foreign) F0 $ 1.4654 F0 0.6824 Strike rate (domestic/foreign) X $ 1.5000 X 0.6667 Domestic interest rate (% p.a.) rd 2.072 % rd 4.160 % Foreign interest rate (% p.a.) rf 4.160 % rf 2.072 % Time (years, 365 days) T 0.247 T 0.247 Days equivalent 90s 90s Volatility (% p.a.) s 11.400 % s 11.400 % d1 -0.3800 d1 0.4400 d2 -0.4400 d2 0.3800 N(d1) 0.3500 N(d1) 0.6700 N(d2) 0.3300 N(d2) 0.6500 Call option premium (per unit fc) c $ 0.0189 c 0.0241 Put option premium (per unit fc) p $ 0.0533 p 0.0086 (European pricing) Call option premium (%) c 1.28 % c 3.55 % Put option premium (%) p 3.62 % p 1.2600 %
Euro-British Pound. How would the call option premium change on the right to buy pounds with euros if the euro interest rate changed to 4.1545% from the initial values listed in this table: The call option on British pounds, if the euro interest rate changed to 4.1545\%, would be . (Round to four decimal places.) Euro-British Pound. How would the call option premium change on the right to buy pounds with euros if the euro interest rate changed to 4.1545% from the initial values listed in this table: The call option on British pounds, if the euro interest rate changed to 4.1545\%, would be . (Round to four decimal places.)Step by Step Solution
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