What Are the Major Determinants of the Value of a Currency

question 10

Essay

What are the major determinants of the value of a currency option (call and put)?
a. Briefly justify each determinant and its direction.
b. What is the relation between a currency put and a currency call (put-call parity)?
c. In what circumstances would an American-type option be exercised before expiration?
(You may provide an example to illustrate your answers.)

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Definitions:

Brainstorming

A creative group problem-solving technique that involves generating a large number of ideas or solutions without immediate evaluation.

Successful

Achieving the desired outcome, goals, or objectives effectively and efficiently.

Rules

Established guidelines or principles governing behavior or conducting activities within specific contexts.

Different Interests

Diverse or varying priorities and desires among individuals or groups in a negotiation or decision-making process .