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for 100,000 Euros. Your cost for obtaining the king crab is $110,000. All cash flows occur in exactly one year. a. Plot your profits in
for 100,000 Euros. Your cost for obtaining the king crab is $110,000. All cash flows occur in exactly one year. a. Plot your profits in one year from the contract as a function of the exchange rate in one year, for exchange rates from $0.75/ to $1.50/. Label this line "Unhedged Profits". crab contract and the forward contract as a function of the exchange rate in one year. Label this line "Forward Hedge". a strike price of $1.25/ is trading for $0.10/. To hedge the risk of your profits, should you buy or sell the call or the put? line "Option Hedge". (Note: You can ignore the effect of interest on the option price.) each line). When there is a risk of cancellation, which type of hedge has the least downside risk? Explain briefly. a. Plot your profits in one year from the contract as a function of the exchange rate in one year, for exchange rates from $0.75/ to $1.50/. Label this line "Unhedged Profits". c. D. for 100,000 Euros. Your cost for obtaining the king crab is $110,000. All cash flows occur in exactly one year. a. Plot your profits in one year from the contract as a function of the exchange rate in one year, for exchange rates from $0.75/ to $1.50/. Label this line "Unhedged Profits". crab contract and the forward contract as a function of the exchange rate in one year. Label this line "Forward Hedge". a strike price of $1.25/ is trading for $0.10/. To hedge the risk of your profits, should you buy or sell the call or the put? line "Option Hedge". (Note: You can ignore the effect of interest on the option price.) each line). When there is a risk of cancellation, which type of hedge has the least downside risk? Explain briefly. a. Plot your profits in one year from the contract as a function of the exchange rate in one year, for exchange rates from $0.75/ to $1.50/. Label this line "Unhedged Profits". c. D
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