Question
Suppose the exchange rate is $1.29/Fr, the Swiss franc-denominated continuously compounded interest rate is 7%, the...
Suppose the exchange rate is $1.29/Fr, the Swiss franc-denominated continuously compounded interest rate is 7%, the U.S. dollar-denominated continuously compounded interest rate is 5%, and the exchange rate volatility is 24%. What is the Black-Scholes value of a 3-month $1.30-strike European call on the Swiss franc?
Correct answer is $.0533
Please answer by hand, no excel.
Thank you!
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