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Question on Asset Pricing.

By adi.nsit ·
Can someone help me with the answer to this question please :

Consider financial model on exchange rates. Assume that spot exchange rate S0 = 4, domestic annualized monthly rate r = 12% and foreign annualized monthly rate q = 24%. Denote by F(n,m) the forward exchange rate computed at month n for delivery at month m, n < m.

Compute the arbitrage-free price of the derivative security, which pays at month N = 12 the amount F(N/2,N) − F(0,N) = F(6, 12) − F(0, 12).

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Maybe you should consider making this easier or simpler

by OH Smeg In reply to Question on Asset Pricing ...

As we lowly IT Techs know how to do things but get easily confused when faced with a complicated Mathematical Problem like the one posed here.

If you keep your request Simple I'm sure that you'll get a suitable answer.

Col

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