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Problem 2: Consider an at-the-money-forward European option with T years to maturity. Let Ft denote the forward price, so K=FT. Show that the formula 1

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Problem 2: Consider an at-the-money-forward European option with T years to maturity. Let Ft denote the forward price, so K=FT. Show that the formula 1 CZ =e-RT FTOVI ~(0.4) e-RT FOVT 2T is a good approximation for the value of the call, where R is the rate of interest and o is the implied volatility for o T

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