You are in New Zealand. You are planning to price an American put option on Canadian dollar futures, maturing in 8 months. You plan to use a 3 step tree. The New Zealand interest rate is 9.40%, while the Canadian interest rate is 0.60% (both with continuous compounding). The Canadian dollar futures price has volatility 19.6096. What is the risk neutral probability for the up state? 00.4601 O 04769 0.5836 O 05010

Q: "Use the Black-Scholes pricing formula to calculate the price today of a European call option with…

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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.