Financial Risk Manager Part 1
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A one-year European call option on the Euro has an exercise price of $1.40 when the current exchange rate is EUR/USD $1.34. The risk-free rate in the United States is 4% and the Eurozone risk-free rate is 3%. The volatility of the spot exchange rate is 30% per annum. What is the price of the call option?
A one-year European call option on the Euro has an exercise price of $1.40 when the current exchange rate is EUR/USD $1.34. The risk-free rate in the United States is 4% and the Eurozone risk-free rate is 3%. The volatility of the spot exchange rate is 30% per annum. What is the price of the call option?
Exam-Like
A
$0.136
B
$0.297
C
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