Question: Consider AAAPI the Nikkei ADR in disguise To answer this

Consider AAAPI, the Nikkei ADR in disguise. To answer this question, use the information in Table 23.4.
a. What is the volatility of Y , the price of AAAPI?
b. What is the covariance between Y and x, the dollar-yen exchange rate?
c. What is the correlation between Y and x, the dollar-yen exchange rate?
d. Using this information on the volatility of Y and the correlation between Y and x, construct a joint binomial tree for x and Y . Use this tree to price a Nikkei quanto forward.

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  • CreatedAugust 12, 2015
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