Question
Suppose that USD/sterling spot and forward exchange rates are as follows: Spot 1.5580 90-day forward 1.5556 180-day forward 1.5518 What opportunities are open to an
Suppose that USD/sterling spot and forward exchange rates are as follows:
Spot 1.5580
90-day forward 1.5556
180-day forward 1.5518
What opportunities are open to an arbitrageur in the following situations?
(a) A 180-day European call option to buy 1 for $1.42 costs 2 cents.
(b) A 90-day European put option to sell 1 for $1.49 costs 2 cents.
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Multinational Business Finance
Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett
13th edition
132743469, 978-0132743464
