Question : Currency options defined as the right to buy or sell : 6947
Currency options are defined as the right to buy or sell currencies at specified prices. Review the modified Black-Scholes option pricing model (also known as the Garman-Kohlhagen-Black-Scholes model) here: Resolution: The Authority on Derivative Pricing. (http://www.derivativepricing.com/blogpage.asp?id=22)Discuss the relationships between these variables. In other words, explain the “moneyness” or the relationship between the current spot rate and the strike price. Explain the relationship between the domestic interest rate, the foreign interest rate, the time to maturity, and the volatility. Finally, explain the option value.