December 2025
Intermediate to advanced
561 pages
27h 17m
English
book
International Financial Management: An Analytical Framework, 2nd Edition by Pearson
by Thummuluri Siddaiah
Content preview from International Financial Management: An Analytical Framework, 2nd Edition by Pearson
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CURRENCY OPTIONS 257
CeSNdeKN d
e
r
f
T
r
d
T
=−
−
[()] [()]
01 2
PKeNdSeNd
e
r
d
T
r
f
T
=−
−−
−
−
() (( )
20 1
or,
Pe KN dF
Nd
e
r
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T
=
−
−− −[(
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)
21
(7.7)
The value of a put option can also be derived from put–call parity (see Section 7.13) in the
following way:
PKFe
PCeS
eK
ee T
r
d
T
ee
r
f
T
r
d
T
=+−
=− +
−
−
−
C( )
0
Ineachoftheseequations,
C = Value of European call option on one unit of foreign currency
P = Value of European put option on one unit of foreign currency
S
0
= Current spot rate of foreign exchange rate
F
T
= Current forward exchange rate for delivery at time T
K = Exercise price on one unit of foreign currency
r
d
= Risk-free domestic interest rate in continuously ...
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