International Financial Management 2nd Edition by Geert Bekaert ,Robert Hodrick

تمرين 22

Let the continuously compounded 6-month USD interest rate be 3% p.a., let the analogous JPY interest rate be 1% p.a., let the exchange rate be ¥98/$, and assume that the volatility of the continuously compounded annualized rate of appreciation of the yen relative to the dollar is 13%. Use the Garman- Kolhagen option pricing model to determine the yen price of a 6-month European dollar call option with a strike price of ¥100 /$. How does your answer change if the volatility were 16% p.a.