International Financial Management Study Set 1
Quiz 5: Currency Derivatives
78.The lower bound of a put option premium is the greater of zero and the difference between the exercise price and the spot rate; the upper bound of a currency put option is the exercise price.
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77.The lower bound of the call option premium is the greater of zero and the difference between the spot rate and the exercise price; the upper bound of a currency call option is the spot rate.
79.Due to put-call parity, we can use the same formula to price calls and puts.
80.If an actual put option premium is less than what is suggested by the put-call parity relationship, arbitrage can be conducted.
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