Question
You work in an investment bank. A client comes to your desk asking for quotations for both call options and forward contracts for a specific
You work in an investment bank. A client comes to your desk asking for quotations for
both call options and forward contracts for a specific company XYZ, with expiry in 180
days. The company has just gone through its initial public offering and today is the first
trading day for XYZ. Note that XYZ is specialized in some minerals mining and trading.
Discuss how you can set up the fair prices for both call options to the forward contracts for
your client. Note that you need to discuss according to the pricing principles and
particulars for derivatives. (Maximum of 1000 words.)
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