Problem1

Consider a six-months at-the-money European call option on a currency with strike price of 1.45. The current exchange rate is 1.40 with the 18% of volatility. The domestic risk-free rate is 6% per annum, and the foreign risk-free interest rate is 12% per annum. Calculate the value of the option.

Problem2

Consider a six-months European put option on a currency with strike price of 1.5. The current exchange rate is 1.4 with the 18% of volatility. The domestic risk-free rate is 6% per annum, and the foreign risk-free interest rate is 12% per annum. Calculate the value of the option.

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