Question
Suppose that the exchange rate is 1.25 = 1.00. Options (calls and puts) are available on the London exchange in units of 10,000 with strike
Suppose that the exchange rate is 1.25 = 1.00. Options (calls and puts) are available on the London exchange in units of 10,000 with strike prices of 0.80 = 1.00. Options (calls and puts) are available on the Frankfurt exchange in units of 10,000 with strike prices of 1.25 = 1.00. For a U.K. firm to hedge a 100,000 receivable, A. buy 10 call options on the euro with a strike in pounds sterling. B. buy 8 put options on the pound with a strike in euro. C. buy 10 put options on the euro with a strike in pounds sterling. D. buy 8 call options on the pound with a strike in euro. E. both a) and b) F. both c) and d)
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