How would you respond to situation

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Reference no: EM133492554

Question: Suppose that the current spot exchange rate is S=1.24$/€. You observe the following American style options:

a. an American put on the Euro with K=1.30$/€, 3 months till expiration that is selling in the market for P=0.05$/€. and

b. an American call on the Euro with K=1.20$/€, 3 months till expiration is selling in the market for C=0.04$/€.

How would you respond to this situation?

Reference no: EM133492554

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