Question: An Excel workbook entitled FX Option Pricing is downloadable from this book's Web site. The workbook has five spreadsheets constructed for pricing currency options for the following five currency pairs (dollar/euro shown here): U.S. dollar/euro, U.S. dollar/Japanese yen, euro/Japanese yen, U.S. dollar/British pound, and euro/British pound.
U.S. Dollar/British Pound. Assuming the same initial values for the dollar/pound cross rate in the FX Option Pricing workbook, how much more would a call option on pounds be if the maturity was doubled from 90 to 180 days? What percentage increase is this for twice the length of maturity?