Task 1.Using the currency exchange rate between the GBP (or USD if not available) and the currency of your home country (or the country geographically closest to your country if you country’s currency is not convertible) try to identify if the there is a Covered Interest Rate arbitrage opportunity. In the absence of forward exchange rates identify if there is a Uncovered Interest Rate arbitrage opportunity. You can make any assumptions to answer this question, but please be explicit. Also, make sure indicate the source of all data you use.Task 2. Find currently traded option contracts on three (2) currency pairs. Chose the most traded maturity and strike rate with the most recent put and call prices. Calculate/estimate all variables needed to value these options. Be explicit how you estimated these values.Using the FX Option Pricing spreadsheet (uploaded on MyCourses) calculate the value of the call and put options and compare them to the current market price. Id there any difference in values obtained? What might be the reason for such differences?
