Exam 7: Futures and Options on Foreign Exchange

Find the hedge ratio for a put option on $15,000 with a strike price of €10,000.In one period the exchange rate (currently S($/€)= $1.50/€)can increase by 60% or decrease by 37.5% .

(Multiple Choice)

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Question 81

In the event of a default on one side of a futures trade,

(Multiple Choice)

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Question 82

Empirical tests of the Black-Scholes option pricing formula

(Multiple Choice)

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Question 83

From the perspective of the writer of a put option written on €62,500.If the strike price is $1.55/€,and the option premium is $1,875,at what exchange rate do you start to lose money?

(Multiple Choice)

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Question 84

Which equation is used to define the futures price?

(Multiple Choice)

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Question 85

Yesterday,you entered into a futures contract to buy €62,500 at $1.50 per €.Your initial performance bond is $1,500 and your maintenance level is $500.At what settle price will you get a demand for additional funds to be posted?

(Multiple Choice)

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Question 86

If the call finishes in-the-money what is your portfolio cash flow?

(Essay)

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Question 87

Yesterday,you entered into a futures contract to buy €62,500 at $1.50/€.Your initial margin was $3,750 (= 0.04 * €62,500 * $1.50/€ = 4 percent of the contract value in dollars).Your maintenance margin is $2,000 (meaning that your broker leaves you alone until your account balance falls to $2,000).At what settle price (use 4 decimal places)do you get a margin call?

(Multiple Choice)

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Question 88

Use your results from the last three questions to verify your earlier result for the value of the call.

(Essay)

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Question 89

A currency futures option amounts to a derivative on a derivative.Why would something like that exist?

(Multiple Choice)

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Question 90

Comparing "forward" and "futures" exchange contracts,we can say that

(Multiple Choice)

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Question 91

The "open interest" shown in currency futures quotations is

(Multiple Choice)

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Question 92

Suppose that you have written a call option on €10,000 with a strike price in dollars.Suppose further that the hedge ratio is ½.Which of the following would be an appropriate hedge for a short position in this call option?

(Multiple Choice)

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Question 93

Empirical tests of the Black-Scholes option pricing formula

(Multiple Choice)

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Question 94

Consider an option to buy €12,500 for £10,000. In the next period, the euro can strengthen against the pound by 25% (i.e. each euro will buy 25% more pounds) or weaken by 20%. Big hint: don't round, keep exchange rates out to at least 4 decimal places. -Calculate the current €/£ spot exchange rate.

(Essay)

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Question 95

Which of the following is correct?

(Multiple Choice)

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Question 96

Consider an option to buy €12,500 for £10,000. In the next period, the euro can strengthen against the pound by 25% (i.e. each euro will buy 25% more pounds) or weaken by 20%. Big hint: don't round, keep exchange rates out to at least 4 decimal places. -Calculate the hedge ratio.

(Essay)

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Question 97

For European currency options written on euro with a strike price in dollars,what of the effect of an increase in the exchange rate S(€/$)?

(Multiple Choice)

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Question 98

An investor believes that the price of a stock,say IBM's shares,will increase in the next 60 days.If the investor is correct,which combination of the following investment strategies will show a profit in all the choices? (i)- buy the stock and hold it for 60 days (ii)- buy a put option (iii)- sell (write)a call option (iv)- buy a call option (v)- sell (write)a put option

(Multiple Choice)

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Question 99

Find the dollar value today of a 1-period at-the-money call option on €10,000.The spot exchange rate is €1.00 = $1.25.In the next period,the euro can increase in dollar value to $2.00 or fall to $1.00.The interest rate in dollars is i_$ = 27.50%; the interest rate in euro is i_€ = 2%.

(Multiple Choice)

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Question 100

Showing 81 - 100 of 100

Find the hedge ratio for a put option on $15,000 with a strike price of €10,000.In one period the exchange rate (currently S($/€)= $1.50/€)can increase by 60% or decrease by 37.5% .

In the event of a default on one side of a futures trade,

Empirical tests of the Black-Scholes option pricing formula

From the perspective of the writer of a put option written on €62,500.If the strike price is $1.55/€,and the option premium is $1,875,at what exchange rate do you start to lose money?

Which equation is used to define the futures price?

Yesterday,you entered into a futures contract to buy €62,500 at $1.50 per €.Your initial performance bond is $1,500 and your maintenance level is $500.At what settle price will you get a demand for additional funds to be posted?

If the call finishes in-the-money what is your portfolio cash flow?

Use your results from the last three questions to verify your earlier result for the value of the call.

A currency futures option amounts to a derivative on a derivative.Why would something like that exist?

Comparing "forward" and "futures" exchange contracts,we can say that

The "open interest" shown in currency futures quotations is

Suppose that you have written a call option on €10,000 with a strike price in dollars.Suppose further that the hedge ratio is ½.Which of the following would be an appropriate hedge for a short position in this call option?

Empirical tests of the Black-Scholes option pricing formula

Which of the following is correct?

Consider an option to buy €12,500 for £10,000. In the next period, the euro can strengthen against the pound by 25% (i.e. each euro will buy 25% more pounds) or weaken by 20%. Big hint: don't round, keep exchange rates out to at least 4 decimal places. -Calculate the hedge ratio.

For European currency options written on euro with a strike price in dollars,what of the effect of an increase in the exchange rate S(€/$)?

Find the dollar value today of a 1-period at-the-money call option on €10,000.The spot exchange rate is €1.00 = $1.25.In the next period,the euro can increase in dollar value to $2.00 or fall to $1.00.The interest rate in dollars is i_$ = 27.50%; the interest rate in euro is i_€ = 2%.

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 7: Futures and Options on Foreign Exchange

Find the hedge ratio for a put option on $15,000 with a strike price of €10,000.In one period the exchange rate (currently S($/€)= $1.50/€)can increase by 60% or decrease by 37.5% .

In the event of a default on one side of a futures trade,

Empirical tests of the Black-Scholes option pricing formula

From the perspective of the writer of a put option written on €62,500.If the strike price is $1.55/€,and the option premium is $1,875,at what exchange rate do you start to lose money?

Which equation is used to define the futures price?

Yesterday,you entered into a futures contract to buy €62,500 at $1.50 per €.Your initial performance bond is $1,500 and your maintenance level is $500.At what settle price will you get a demand for additional funds to be posted?

If the call finishes in-the-money what is your portfolio cash flow?

Use your results from the last three questions to verify your earlier result for the value of the call.

A currency futures option amounts to a derivative on a derivative.Why would something like that exist?

Comparing "forward" and "futures" exchange contracts,we can say that

The "open interest" shown in currency futures quotations is

Suppose that you have written a call option on €10,000 with a strike price in dollars.Suppose further that the hedge ratio is ½.Which of the following would be an appropriate hedge for a short position in this call option?

Empirical tests of the Black-Scholes option pricing formula

Which of the following is correct?

Consider an option to buy €12,500 for £10,000. In the next period, the euro can strengthen against the pound by 25% (i.e. each euro will buy 25% more pounds) or weaken by 20%. Big hint: don't round, keep exchange rates out to at least 4 decimal places. -Calculate the hedge ratio.

For European currency options written on euro with a strike price in dollars,what of the effect of an increase in the exchange rate S(€/$)?

Find the dollar value today of a 1-period at-the-money call option on €10,000.The spot exchange rate is €1.00 = $1.25.In the next period,the euro can increase in dollar value to $2.00 or fall to $1.00.The interest rate in dollars is i$ = 27.50%; the interest rate in euro is i€ = 2%.

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Find the dollar value today of a 1-period at-the-money call option on €10,000.The spot exchange rate is €1.00 = $1.25.In the next period,the euro can increase in dollar value to $2.00 or fall to $1.00.The interest rate in dollars is i_$ = 27.50%; the interest rate in euro is i_€ = 2%.