medium · FRM Part 1 Financial Markets and Products
A European put option on a currency has a strike price of K = 1.10 (USD/EUR). The current spot rate is S_0 = 1.05. The USD risk-free rate is r_d = 5% and the EUR risk-free rate is r_f = 2%.
What is the lower bound for this 1-year put option?
- $0.100
- $0.050
- $0.027
- $0.017
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