a. (50 Points) A Seagull option is a contract defined as follows: If at maturity, spot...
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a. (50 Points) A Seagull option is a contract defined as follows: If at maturity, spot < X₁, client buy USD at X₁ If at maturity, X₁ <spot < X₂, client buy USD at spot ■ • ■ If at maturity, X2 <spot < X3, client buy USD at X2 If at maturity, spot > X3, client buy USD at spot-(X3-X₂) • Show the payoff diagram of this contract • Decompose this option in to a combination of standard Put/Call European option • Define the target user of this option (exporter or importer) and his/her view of future exchange rate. a. (50 Points) A Seagull option is a contract defined as follows: If at maturity, spot < X₁, client buy USD at X₁ If at maturity, X₁ <spot < X₂, client buy USD at spot ■ • ■ If at maturity, X2 <spot < X3, client buy USD at X2 If at maturity, spot > X3, client buy USD at spot-(X3-X₂) • Show the payoff diagram of this contract • Decompose this option in to a combination of standard Put/Call European option • Define the target user of this option (exporter or importer) and his/her view of future exchange rate.
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A Seagull option is a type of exotic option that allows the buyer to purchase a currency at a specif... View the full answer
Related Book For
Advanced Accounting
ISBN: 978-0538480284
11th edition
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Posted Date:
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