Solved

Find the Value of a Call Option Written on €100

Question 96

Multiple Choice

Find the value of a call option written on €100 with a strike price of $1.00 = €1.00.In one period there are two possibilities: the exchange rate will move up by 15% or down by 15% .The U.S.risk-free rate is 5% over the period.The risk-neutral probability of dollar depreciation is 2/3 and the risk-neutral probability of the dollar strengthening is 1/3. Find the value of a call option written on €100 with a strike price of $1.00 = €1.00.In one period there are two possibilities: the exchange rate will move up by 15% or down by 15% .The U.S.risk-free rate is 5% over the period.The risk-neutral probability of dollar depreciation is <sup>2</sup>/<sub>3</sub> and the risk-neutral probability of the dollar strengthening is <sup>1</sup>/<sub>3</sub>. A) $9.5238 B) $0.0952 C) $0 D) $3.1746


A) $9.5238
B) $0.0952
C) $0
D) $3.1746

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Q1: Find the Black-Scholes price of a six-month

Q10: Comparing "forward" and "futures" exchange contracts, we

Q30: If the call finishes in-the-money what is

Q39: Calculate the hedge ratio.

Q39: Calculate the hedge ratio.

Q53: Consider a 1-year call option written on

Q65: In reference to the futures market, a

Q74: If the call finishes out-of-the-money what is

Q82: For European options, what of the effect

Q86: Find the risk neutral probability of an