List the factors that affect currency put option premiums and briefly explain the relationship that exists for
Question:
List the factors that affect currency put option premiums and briefly explain the relationship that exists for each.
Step by Step Answer:
These factors are listed below The lower the existing spot rate relati...View the full answer
Related Video
A put option is a financial contract that gives the owner the right, but not the obligation, to sell an underlying asset, such as a stock or a commodity, at a predetermined price, known as the strike price, on or before a specific date, known as the expiration date. Put options are used by investors as a form of insurance against a decline in the value of the underlying asset. If an investor expects the value of an asset to fall in the future, they can purchase a put option on that asset. If the value of the asset does fall, the put option will increase in value, allowing the investor to sell the asset at the higher strike price. For example, if an investor owns 100 shares of a stock that is currently trading at $50 per share, they may purchase a put option with a strike price of $45 and an expiration date three months in the future. If the stock price falls to $40 before the expiration date, the investor can exercise the put option and sell their shares for $45 each, even though the market price is only $40. This would allow the investor to limit their losses. It\'s important to note that purchasing a put option involves paying a premium to the seller of the option, and the investor can lose the entire premium if the price of the underlying asset does not decline as expected. Put options are just one type of financial derivative and should only be used by experienced investors who understand the risks involved.
Students also viewed these Finance questions
-
List the factors that affect currency call option premiums and briefly explain the relationship that exists for each. Do you think an at-the-money call option in euros has a higher or lower premium...
-
List and briefly describe some of the factors that affect homeowners insurance premiums.
-
Briefly discuss the factors that affect the rates of chemical reactions. Which of the factors affect the magnitude of the rate constant? Which factor(s) do not affect the magnitude of the rate...
-
The accompanying table shows data from the World Bank, World Development Indicators, for real GDP per capita (2010 U.S. dollars) in France, Japan, the United Kingdom, and the United States in 1960...
-
Sony faces challenges in finding suitable talent for its operations in China and Europe. What steps should it take to ensure it has an adequate pool of international managers and other talent for...
-
Discuss advantages and disadvantages of using a large control volume.
-
Develop an argument for the implementation of an HRIS using a risk reduction strategy and an organizational enhancement strategy.
-
Derrick owns a farm in eastern North Carolina. A hurricane hit the area and destroyed a farm building and some farm equipment and damaged a barn. Due to the extensive damage throughout the area, the...
-
3. Convert the ER Diagram below to a list of tables. The first step will be to identify wwwwww cardinalty/optionality. Be sure to identify primary keys and foreign keys. {Be careful here - note the...
-
In that simple random-relocation model, each person is endowed with 50 goods when young and nothing when old. The money stock is constant and equal to $1,000,000. Each island has a constant...
-
When should a speculator purchase a call option on Australian dollars? When should a speculator purchase a put option on Australian dollars?
-
Randy Rudecki purchased a call option on British pounds for $.02 per unit. The strike price was $1.45, and the spot rate at the time the option was exercised was $1.46. Assume there are 31,250 units...
-
Evaluate the following integrals. S dx V4 - x
-
Kim Doss is a 50% partner in Golf General Partnership. Kim contributed $30,000 cash to the partnership at the beginning of Year 1 in exchange for her general partnership interest. The total...
-
Unexpectedly, you win $2500 in a raffle. You don't need the cash right now, so you decide to invest it. How would you invest the money?
-
Shoes supreme Ltd.'s general ledger at their July 31, this year-end included the following account balances before adjusting journal entries: Note Payable, Short-Term $ 80,000 Accounts Payable...
-
Refer to Domino s . One new pay method Domino s implemented to combat its problems is a store - profitability bonus. On average, the store - profitability bonuses add 3 0 percent, or about $ 1 0 ,...
-
Easy credit inc reported cash sales of $45000 credit sales of $280000 and write offs of bad debts of $7000 for last year. Accounts receivables had a balance of $327000 at the beginning of the year...
-
Enhance the program of Exercise E22.7 so that the last active thread also prints a combined count. Use locks to protect the combined word count and a counter of active threads. Data from exercise...
-
Will the prediction interval always be wider than the estimation interval for the same value of the independent variable? Briefly explain.
-
Why is the distinction of a commodity important to understanding agribusiness?
-
What are federal agency bonds? Compare and contrast the three most common federal agency bonds.
-
What are corporate bonds? Are corporate bonds subject to default risk? What are junk bonds? Why would investors purchase junk bonds?
-
Bernie purchased 20 bonds with par values of $ 1,000 each. The bonds carry a coupon rate of 9% payable semiannually. How much will Bernie receive for his first interest payment?
-
Our office building has a total square footage of 120,000 square feet.We have 9 tenants in the building and no vacancies.The total square footage of the tenant spaces is 105,000.A) What is the Load...
-
00 00 1) A state transition diagram for a synchronous finite state machine is shown in Figure 3. Derive the combinatorial logic required to implement this FSM with the use of Karnaugh maps. Note that...
-
Prove that Russian multiplication does what it needs to do, i.e. the result is the product of the two integers. Do not use the proof of the book. It is mainly an exercise in understanding the binary...
Study smarter with the SolutionInn App