19 Hedging with put options. As treasurer of Tupperman

(a UK exporter to New Zealand), you must decide how to hedge (if at all) future receivables of 250 000 New Zealand dollars 90 days from now. Put options are available for a premium of £0.02 per unit and an exercise price of £0.24 per New Zealand dollar. The forecasted spot rate of the NZ$ in 90 days follows:

Given that you hedge your position with options, create a probability distribution for British pounds to be received in 90 days.

Transcribed Image Text:

Future spot rate Probability 0.25 30% 0.24 0.22 50 20