Calculate the dollar value of a european call option

Assignment Help Financial Management
Reference no: EM131859497

Suppose that the spot price of the Swiss franc (CHF) is $0.99 and that the Swiss franc/U.S. dollar exchange rate has an annual volatility of 10% (calculated on the basis of continuously compounded returns). The risk-free rates of interest in Switzerland and the United States are 3% and 2% p.a., respectively.

a) Calculate the dollar value of a European call option to buy Swiss francs at current spot exchange rate for the contracts that have 4 months to their maturity. The contract size for the options is CHF62,500.

b) Use put-call parity to calculate the price of an identical European put option position.

c) What is the dollar price of the same maturity call option for which the underlying currency is USD and the strike price is equal to the current spot exchange rate?

Reference no: EM131859497

Questions Cloud

Part of replicating portfolio for the apple call option : How much risk-free borrowing is necessary as part of the “replicating portfolio” for the Apple call option?
What is the principle remaining on loan : After two years of payments (24 payments), what is the principle remaining on the loan?
What is the net present worth of the machine : If the machine lasts indefinitely under these conditions, what is the net present worth (NPW) of the machine at an interest rate of 15.2%
Convertible bonds : Iron Works Inc. issued $12,000,000 of 4%, 10-year bonds on September 1, 2017 for $11,896,605 plus accrued interest.
Calculate the dollar value of a european call option : Calculate the dollar value of a European call option to buy Swiss francs at current spot exchange rate for the contracts that have 4 months to their maturity.
What is the value of identical three-month put option : A three-month European call option on the index with a strike price of 245 is currently worth $10. What is the value of an identical three-month put option?
What is the current price of bond : If the yield to maturity is 7.8 percent, what is the current price of the bond?
Coverage for damage to your auto of personal auto policy : According to Part D-Coverage for Damage to Your Auto of a Personal Auto Policy, the insurer's limit of liability for physical damage loss to covered auto is?
What is the price of the option if it is an american call : What is the price of the option if it is a European call? What is the price of the option if it is an American call?

Reviews

Write a Review

Financial Management Questions & Answers

  What is the net present value of this project

If the tax rate is 31% and the required rate of return is 17%, what is the net present value (NPV) of this project?

  Projects have differing cash flows and finite lives

Assume you are looking at a graph that relates the net present value of two mutually exclusive investment projects to various discount rates. Assume the projects have differing cash flows and finite lives. Which one of these statements accurately ref..

  What was the firms net income

W.C. Cycling had $72,000 of cash at year-end 2011 and $18,000 in cash at year-end 2012. The firm invested in property, plant, and equipment totaling $290,000. Cash flow from financing activities totaled +$190,000. If accruals increased by $25,000, re..

  What is the monthly interest rate on this annuity

If the professor’s remaining life expectancy is 20 years, what is the monthly interest rate on this annuity? What is the effective annual interest rate?

  Expected to generate a net operating income

Your company is exploring the opportunity to buy an office building that is expected to generate a Net Operating Income (NOI) of $650,000 next year.

  What is the future value of each of streams of payments

As a result of winning the Gates Energy Innovation Award, you are awarded a growing perpetuity. What is the future value of each of streams of payments.

  Interest rate-future value and time in years

Solve each situation separately, where P = principal, r = interest rate t = time in years, I = interest and FV = future value

  What are the costs and benefits of having a matrix structure

What are the costs and benefits of having a matrix structure? Discuss the differences between foreign trade and foreign direct investment.

  Analyze the stock of general electric corporation

Analyze the stock of General Electric Corporation.- Find the number of shares of stock outstanding and enter it in the samespreadsheet.

  Annualized basis-what is the yield-to-maturity of bond

" United Air has a 8.5% coupon 22 year bond (par value = $1,000). Assume that coupon payments are semi-annual and that the current price is $1025.55. What is the yield-to-maturity of this bond? Be sure to report on an annualized basis"

  What must be the face value of the two zeros to fund plan

You manage a pension fund that will provide retired workers with lifetime annuities. What must be the face value of the two zeros to fund the plan?

  A national bank is supervised by all of the agencies

A national bank is supervised by all of the following agencies EXCEPT

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd