Use one-period binomial lognormal model

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Reference no: EM131829909

Put options on a stock trade for three strike prices, $32, $34, and $23. The $32-strike put currently costs $10, while the $34-strike put costs $15. What is the least or the most cost for the $23-strike put option?

One euro currently trades for $1.56. The dollar-denominated annual continuously- compounded risk-free interest rate is 0.02, and the euro-denominated annual continuously-compounded risk-free interest rate is 0.09. The annualized standard deviation of the continuously compounded return on the euro is 0.54. Using a one-period binomial forward tree model, calculate what the euro price in dollars will be in two years if the euro’s price increases.

Same as problem above.

(1) Use a one-period binomial lognormal model, calculate what the euro price in dollars will be in two years if the euro’s price increases.

(2) Price a call option on euro exchange rate with strike price $1.56.

Reference no: EM131829909

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