The spot exchange rate in dollars per euro is $1.31.Dollar denominated interest rates are 4.0% and euro denominated interest rates are 3.0%.What is the difference in call and put option prices given a 2-year option and a $1.34 strike price?

Question

Quizplus · Accepted Answer

The difference in call and put option prices can be calculated using the put-call parity formula for currency options. The formula is: Call - Put = Spot rate * e^(r_d * T) - Strike price * e^(r_f * T). Substituting the given values, the difference is approximately -$0.1041.

The Spot Exchange Rate in Dollars Per Euro Is $1