Describe the relevant trading strategies

Reference no: EM133377263

Question: USD spot and forward exchange rates are trading in a band, at the following rates: Spot $1.4472/E 90 day forward $1.4450/E 180 day forward $1.441620/E You get together with your trading desk and ask them to price two trading arbitrage opportunities if the following conditions exist: a.

A 180 day European-style call option to buy one euro = $1.41 costs $0.018. b. A 90 day European-style put option to sell one euro for $1.47 costs $0.018.

Describe the relevant trading strategies that the Arbitrageur could undertake to exploit any mispricing in the market.

Reference no: EM133377263

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