Question: The premium of a 100 strike yen denominated put on the euro
The premium of a 100-strike yen-denominated put on the euro is ¥8.763. The current exchange rate is 95 ¥/=C. What is the strike of the corresponding euro-denominated yen call, and what is its premium?
Answer to relevant QuestionsThe price of a 6-month dollar-denominated call option on the euro with a $0.90 strike is $0.0404. The price of an otherwise equivalent put option is $0.0141. The annual continuously compounded dollar interest rate is 5%. a. ...Let S = $100, K = $95, σ = 30%, r = 8%, T = 1, and δ = 0. Let u = 1.3, d = 0.8, and n = 2. Construct the binomial tree for an American put option. At each node provide the premium, ∆ and B. Use the same inputs as in the previous problem, except that K = $1.00. a. What is the price of a 9-month European put? b. What is the price of a 9-month American put? Let S = $100,K = $95, r = 8%, T = 0.5, and δ = 0. Let u = 1.3, d = 0.8, and n = 1. a. Verify that the price of a European put is $7.471. b. Suppose you observe a put price of $8. What is the arbitrage? c. Suppose you ...Repeat the previous problem, except that for each strike price, compute the expected return on the option for times to expiration of 3 months, 6 months, 1 year, and 2 years. What effect does time to maturity have on the ...
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