Question: In valuing currency options with the Black-Scholes model, we saw that the risk-free rate on the foreign currency was equivalent to the dividend yield when

In valuing currency options with the Black-Scholes model, we saw that the risk-free rate on the foreign currency was equivalent to the dividend yield when an individual stock or stock index was the underlying asset. Discuss the appropriateness of this analogy. What sort of transaction involving foreign currency would be required to make this parallel exact?

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