Question: QUESTION FIVE a) Derivatives are financial instruments whose value is derived from the value of one or more basic variables called the underlying. Required; Differentiate

QUESTION FIVE a) Derivatives are financial instruments whose value is derived from the value of one or more basic variables called the underlying. Required; Differentiate between OTC derivatives and exchange traded derivatives b) You are given the following data for the 3-month sterling Pound currency option contracts; \( > \) Call Option strike price \( = \) US \( \$ 1.2540 / \) \( > \) Amount receivable from a US customer \( = \) US \( \$ 470,250 \) \( > \) Contract size \( = 150,000 \) Required: i. Calculate the call option intrinsic value if the spot price is US \( \$ 1.2555 / \) ii. Calculate the number of option contracts required to sell the US \( \$ \) and buy \( \) iii. State if the call option contract is in-the-money or out-of-the-money

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