Consider a two-period binomial model for the stock price with both periods of length one year. Let the initial stock price be S(0) =GH¢100 and assume that the stock pays no dividends. Let the up and down factors be u = 1.25 and d = 0.75, respectively. Let the continuously compounded interest rate be r = 0.05 per annum. Oliver is interested in purchasing a chooser option with the provision that he can choose if the option is a put or a call after one year. The strike for this option is GH¢100 and the expiry date is two years. Find the price of the chooser option.

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A:

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.