6. Currency put options The premium on a put option is primarily a function of the difference in spot price S relative to the strike price X, the time until maturity T, and the volatility of the currency o. P= f(S-X, T, o) For each characteristic of a put option, use the table to indicate whether that would lead to a higher put option premium or a lower put option premium (all else equal). Characteristic A lower spot price relative to the strike price A longer time before expiration A higher level of volatility for the currency Higher Put Option Premium Lower Put Option Premium 0 O O O When using a put option to hedge receivables in an international currency, a U.S. based MNC can lock in the receive. amount of dollars it will

The premium on a put option is primarily a function of the difference in spot price S relative to the strike price X, the time until maturity x, and the volatility of the currency . P=f(SX,T,) For each characteristic of a put optian, wse the table to indicate whether that would lead to a higher put sobion premum or a lower puc ogetion premium (all else equal). When using a put option to hedge receivables in an international currency, a U.S. based MNC can lock in the amount of dollars it will recelve. The premium on a put option is primarily a function of the difference in spot price S relative to the strike price X, the time until maturity x, and the volatility of the currency . P=f(SX,T,) For each characteristic of a put optian, wse the table to indicate whether that would lead to a higher put sobion premum or a lower puc ogetion premium (all else equal). When using a put option to hedge receivables in an international currency, a U.S. based MNC can lock in the amount of dollars it will recelve