The writer is very fast, professional and responded to the review request fast also. Thank you.
Hi if you could answer the following question that would be greatly appreciated thanks.
Please only do 1 out of the 2 for the following. Unless you could explain both, then that would be great.
|Question 3. Currency Option Pricing with Binomial Model (10 marks) {in January 11, the spot exchange rate for the U.S. dollar is $fl.?fl per Canadian dollar. Inone year’s time, the Canadian dollar is expected to appreciate by ED percent or depreciateby 15 percent. We have a European put option on U.S. dollars expiring in one year, with anexercise price of 1.39 CND$IUS$, that is currently selling for a price of $2.93. Each putopfion gives the holder the right to sell 1i},DflD U.S. dollars. The current one—year CanadianTreasury Bill rate is 2 percent, while the one—year ”.5. Treasury Bill rate is 3 percent, bothcompounded annually. Treat the Canadian dollar as the domestic currency. b. Calculate the estimated value of this put option for U.S. T—Bill rates of [1%, 1%, 2%,4%, 5%, and 5%. Plot these values in a graph [by hand or using Excel), with putoption values on the y—axis and U.S. T—bill rates on the x—axis. What can we oonclude about the relationship between foreign interest rates and foreign currency put optionvalues? {2.5 marks} c. Calculate the estimated value of this put option for Canadian T—Bill rates of (1%, 1%,2%, 4%, 5%, and 6%. Plot these values in a graph [by hand or using Excel], withput option values on the y-axis and Canadian T-bill rates on the x-axis. What can weconclude about the relationship between domestic interest rates and foreign currencyput option values? {2.5 marks]
Show more
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more