I've been studying simulations. Not sure if you'll be able to answer this question from the information provided, but suppose the strike price of a European call is 52, and the expiration is at the end of 6 days. If I found the closing price on day 6 to be 50.11, would I say that the payoff is 0 (or worthless) since 50.11-52 is not greater than 0? I also want to know if I could use the present value of 50.11-52 as an approximation to the cost of the call? And how could I derive a better cost?

I've been studying simulations. Not sure if you'll be able to answer this question from the information provided, but suppose the strike price of a European call is 52, and the expiration is at the end of 6 days. If I found the closing price on day 6 to be 50.11, would I say that the payoff is 0 (or worthless) since 50.11-52 is not greater than 0? I also want to know if I could use the present value of 50.11-52 as an approximation to the cost of the call? And how could I derive a better cost?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter10: Measuring Exposure To Exchange Rate Fluctuations

Section: Chapter Questions

Problem 33QA

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