QUESTION 7 Assume the spot AUD/JPY (Australian Dollar/Japanese Yen) exchange rate is 85 i.e. 1 AUD =

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QUESTION 7 Assume the spot AUD/JPY (Australian Dollar/Japanese Yen) exchange rate is 85 i.e. 1 AUD = 85 JPY, the risk free interest rate in Australia is 4% per annum, the risk free interest rate in Japan is 1% per annum and the AUD/JPY exchange rate volatility is 25% per annum. (a) Calculate the JPY value of a one-year European call option on one AUD with a strike of 88 JPY. (b ) Use your answer in part (a) to calculate the AUD value of a one-year European put option on 88 JPY with a strike of 1 AUD. [5 + 5 = 10 Marks ]

Posted Date: Jun 06, 2024 11:07 PM

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QUESTION 7 Assume the spot AUD/JPY (Australian Dollar/Japanese Yen) exchange rate is 85 i.e. 1 AUD =

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