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Suppose the annual interest rates for Eurodollar and Swiss franc are 5.0% and 3.0%, respectively. The Swiss franc spot rate is $0.6950 and the annualized
Suppose the annual interest rates for Eurodollar and Swiss franc are 5.0% and 3.0%, respectively. The Swiss franc spot rate is $0.6950 and the annualized standard deviation of the Swiss franc exchange rate is 15%. Use the European option-pricing models to find out the value of a one-year call option on Swiss franc that has an exercise price of $0.7000. Suppose the contract size is one unit of Swiss franc.
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