Question
1. Suppose a bank sells a 6-month at-the-money put option on 1 million GBPs. Current exchange rate is 1.56 USD per GBP. Risk free interest
1. Suppose a bank sells a 6-month at-the-money put option on 1 million GBPs. Current exchange rate is 1.56 USD per GBP. Risk free interest rates are 2% and 3% per year for USD and GBP respectively. Volatility of the exchange rate is 20%. How does the bank delta hedge?
(open ended question)
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Public Finance Lessons From The Past And Effects On The Future
Authors: Miguel-Angel Galindo Martin
1st Edition
1629481491, 978-1629481494
