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A Japanese exporter has a 1,000,000 receivable due in one year. Detail a strategy using options that will eliminate exchange rate risk. Listed Options Strike
A Japanese exporter has a 1,000,000 receivable due in one year. Detail a strategy using options that will eliminate exchange rate risk.
Listed Options |
| ||||||||||||||||||||||
| Strike |
| Puts |
| Calls |
|
| ||||||||||||||||
Euro62,500 |
| $ | 1.25 | = | 1.00 |
|
| $ | 0.0075 | per |
| $ | 0.01 | per |
| ||||||||
Yen12,500,000 |
| $ | 1.00 | = | 100 |
|
| $ | 0.0075 | per100 |
|
| 0.01 | per100 |
|
A. | Buy 16 put options on euro, sell 10 call options on yen | |
B. | Buy 16 put options on euro, buy 10 call options on yen | |
C. | Sell 16 call options on euro, buy 10 put options on yen | |
D. | none of the options |
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