Calculate the value of 9-month american call option to buy


Calculate the value of 9-month American call option to buy 1 million units of a foreign currency using a three-step binomial tree. The current exchange rate is 0.79 and the strike price is 0.80 (both expressed as dollars per unit of the foreign currency). The volatility of the exchange rate is 12% per annum. The domestic and foreign risk-free rates are 2% and 5%, respectively. What position in the foreign currency is initially necessary to hedge the risk?

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Financial Management: Calculate the value of 9-month american call option to buy
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