Question: When moving from valuing an option on a non-dividend paying stock to an option on a currency which of the following is true? Please give

When moving from valuing an option on a non-dividend paying stock to an option on a currency which of the following is true? Please give answer by showing the formula.

A. The risk-free rate is replaced by the excess of the domestic risk-free rate over the foreign risk-free rate in all calculations.

B. The formula for u changes.

C. The risk-free rate is replaced by the excess of the domestic risk-free rate over the foreign risk-free rate for discounting.

D. The risk-free rate is replaced by the excess of the domestic risk-free rate over the foreign risk-free rate when p is calculated.

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