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1. What is considered to be an exotic derivative? 2. Average spot rate option: a) Describe how this exotic FX option works (long position). b)

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1. What is considered to be an exotic derivative? 2. Average spot rate option: a) Describe how this exotic FX option works (long position). b) In what circumstances is this option useful to an MNC for hedging FX risk exposures? 3. Average strike rate option: a) Describe how this exotic FX option works (long position). b) In what circumstances is this option useful to an MNC for hedging FX risk exposures? 4. Break forward: a) Describe how this FX derivative works (long position). b) In what circumstances is this derivative useful to an MNC for hedging FX risk exposures? 5. Participating forward: a) Describe how this FX derivative works (long position). Directions: - Due date: Wednesday 11:59 pm, April 12, 2023, under Assessments/Assignments on Folio. - Use the group membership for the group project. Submit one response per group. - Provide short but adequate answers below each question. 1. What is considered to be an exotic derivative? 2. Average spot rate option: a) Describe how this exotic FX option works (long position). b) In what circumstances is this option useful to an MNC for hedging FX risk exposures? 3. Average strike rate option: a) Describe how this exotic FX option works (long position). b) In what circumstances is this option useful to an MNC for hedging FX risk exposures? 4. Break forward: a) Describe how this FX derivative works (long position). b) In what circumstances is this derivative useful to an MNC for hedging FX risk exposures? 5. Participating forward: a) Describe how this FX derivative works (long position). 4. Break forward: a) Describe how this FX derivative works (long position). b) In what circumstances is this derivative useful to an MNC for hedging FX risk exposures? 5. Participating forward: a) Describe how this FX derivative works (long position). 1 b) In what circumstances is this derivative useful to an MNC for hedging FX risk exposures

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