What will be price of the currency option

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Question

A put option on British pounds against the US dollar and has three month expiration date their strike price is $1.80. The current or spot exchange rate between the US dollar and the British pound is $1.69 and the exchange pair has a volatility of 40% per year. The continuously compounded risk-free rate is 4.5 per cent per year for the US dollar and 3 per cent per year for the British pound. Using one-month steps what will be the price of the currency option if it is in European-style?

Reference no: EM133371719

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