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Unformatted text preview: dollar value by 60 percent or decrease by 37.50 percent. The interest rate in dollars is i $ = 3%; the interest rate in euro is i € = 4%. a. Draw the binomial tree for this put option. Your answer is worth zero points if it does not include currency symbols ($, €)! b. Find the riskneutral probability of an “up” move. Hint: you can’t recycle your risk neutral probability from the call option. c. Using your results from parts a) and b) find the value of this put option ( in € ). Your answer is worth zero points if it does not include currency symbols ($, €)! d. Verify that the dollar value of your put option equals the dollar value of your call. Your answer is worth zero points if it does not include currency symbols ($,€)!...
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This note was uploaded on 03/19/2010 for the course FINANCE 4130 taught by Professor Stansfield during the Spring '09 term at Missouri (Mizzou).
 Spring '09
 stansfield
 Derivatives, Exchange Rate

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