Find the Black-Scholes price for a Six month call option Euro100,000, strict price of $1.00/Euro100. Current Exchange Rate $1.25/Euro100. US risk free rate is 5% and Euro risk free is $4. Volatility of underlying asset is 10.7%
I come up with Ce = .63577.
Wondering if I'm correct. Thanks!
The B-S formula for currency options is the following:
c = S*exp(-rf(T-t))*N(d1) - X*exp(-r(T-t))*N(d2)
S is the underlying price (current exchange rate) = $1.25
rf is ...
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