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International Financial Management 2nd Edition by Geert Bekaert ,Robert Hodrick
Edition 2ISBN: 978-0132162760International Financial Management 2nd Edition by Geert Bekaert ,Robert Hodrick
Edition 2ISBN: 978-0132162760 Exercise 28
With the same variables as in Problem 1, use put-call parity to determine the yen price of the corresponding dollar put option with the same maturity and same strike price.
Problem 1
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.
Problem 1
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.
Explanation
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Exchange rate of yen and US dollar along...
International Financial Management 2nd Edition by Geert Bekaert ,Robert Hodrick
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