Option's pricing - anomaly?

CFA Level I Derivatives
#1

Hello everyone :slight_smile:

I have a question with regard to the option pricing - not really a CFA I level topic but I hope someone will help me to understand the issue.

Lets assume situation below (which has actually happened in the past):

Current spot exchange-rate for TRY/EUR = 6.8. Below we have following put options and its prices:

  • 1-day PUT 8.80 (premium of 2.00 TRY for every EUR)

  • 1-month PUT 8.80 (premium of 1.87 TRY for each EUR)

  • 12-month PUT 8.80 (premium 0.80 TRY for every EUR)

My questions is - what might be the reason that options with a longer expiration date are cheaper than those of shorter maturity? (interest rates? economic forecast or macro situation?) I know it’s not a common phenomenon but it seems that it happens.

You are welcome to join the discussion :slight_smile:

Thanks,

Michael