What is the value in dollars of a derivative that pays off $10,000 in one year provided that the dollarsterling exchange rate is greater than 1 5000 at that time The current exchange rate is 1 4800 The dollar and sterling interest rates are 4 and 8 per annum, respectively The volatility of the exch...

It is instructive to consider two different ways of valuing ...

What is the value in dollars of a derivative that pays off $10,000 in one year provided

Question:

What is the value in dollars of a derivative that pays off $10,000 in one year provided that the dollar–sterling is greater than 1.5000 at that time? The current is 1.4800. The dollar and sterling interest rates are 4% and 8% per annum, respectively. The volatility of the is 12% per annum. Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...