Multiple Choice
Suppose that you have written a call option on €10,000 with a strike price in dollars.Suppose further that the hedge ratio is 1/2.Which of the following would be an appropriate hedge for a short position in this call option?
A) Buy €5,000 today at today's spot exchange rate.
B) Agree to buy €5,000 at the maturity of the option at the forward exchange rate for the maturity of the option that prevails today .
C) Buy the present value of €5,000 discounted at i€ for the maturity of the option.
D) Agree to buy €5,000 at the maturity of the option at the forward exchange rate for the maturity of the option that prevails today or buy the present value of €5,000 discounted at i€ for the maturity of the option.
Correct Answer:
Verified
Correct Answer:
Verified
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