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Current price of the put option in hong kong dollar

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Reference no: EM132666009

Use the binomial tree model to price a European put option on a Singapore dollar. The put option expires in 6 months, and its strike price is 5.6 Hong Kong dollars. Suppose the current exchange rate of Singapore dollar is 5.7 Hong Kong dollars. The exchange rate could either rise to 5.9 in the up state, or drop to 5.5 in the down state. The annual risk-free rate in Hong Kong is 2%, and the annual risk-free rate in Singapore is 1%. Find the current price of the put option in Hong Kong dollar.

Reference no: EM132666009

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