Put call parity currency options jewelry


Put call parity currency options jewelry


Put-Call Parity for Currency OptionsPut-Call Parity for Currency OptionsAny currency option deal may be equivalently valued as either a call or a put using a parity condition that is specific to currency options. If the spot rate is expressed in a consistent manner to the strike rate, then put call parity currency options jewelry computed total premium for the call leg will be the same as the computed total premium for the put leg, assuming both values are expressed in the same currency.In This SectionAn Example of Put-Call Parity for Currency OptionsCopyright 2013 Hedgebook Ltd.

The USD riskless rate is 5%, the NZD riskless rate is 7%, exchange rate volatility is 20%, and the option will expire in 1 year. The spot rate is 0.52 (indirect quote) and the strike rate is 0.51.To value the option as a call, we treat the NZD as the domestic CCY and the USD as the foreign CCY. The domestic and foreign interest rates are therefore 7% and 5%, respectively.




Put call parity currency options jewelry

Put call parity currency options jewelry

Put call parity currency options jewelry



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