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Suppose that the exchange rate is 1.25=1.00. Options (calls and puts) are available on the London exchange with strike prices 0.80=1.00. Options (calls and puts)
Suppose that the exchange rate is 1.25=1.00. Options (calls and puts) are available on the London exchange with strike prices 0.80=1.00. Options (calls and puts) are available on the Frankfurt exchange with strike prices of 1.25=1.00. Hedge ratios are 1.00 for call options and 1.00 for put options. For a U.K. firm to hedge a 100,000 receivable, Buy a put option on 142,857 euros with a strike price in pounds sterling. Buy a put option on 111,111 euros with a strike price in pounds sterling. Buy a put option on 100,000 euros with a strike price in pounds sterling. Buy a put option on 125,000 euros with a strike price in pounds sterling
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