Annualizing standard deviation of dollar


Assignment:

Q1. Assume that the spot price of the British pound is $1.55, the 30-day annualized sterling interest rate is 10%, the 30-day annualized U.S. interest rate is 8.5%, and the annualized standard deviation of the dollar:pound exchange rate is 17%. Calculate the value of a 30-day PHLX call option on the pound at a strike price of $1.57.

Q2. Suppose the spot price of the yen is $0.0109, the threemonth annualized yen interest rate is 3%, the three-month annualized dollar rate is 6%, and the annualized standard deviation of the dollar:yen exchange rate is 13.5%. What is the value of a three-month PHLX call option on the Japanese yen at a strike price of $0.0099/¥?

Your answer must be, typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.

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Supply Chain Management: Annualizing standard deviation of dollar
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