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

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

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter11: Managing Transaction Exposure

Section: Chapter Questions

Problem 19QA

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