Hedgng with Foreign Currency Options外汇期权套期保值.pptVIP

International Finance: GSM 658 Eli Waite International Finance: GSM 658 Eli Waite International Finance: GSM 658 Eli Waite International Finance: GSM 658 Eli Waite International Finance: GSM 658 Eli Waite International Finance: GSM 658 Eli Waite International Finance: GSM 658 Eli Waite International Finance: GSM 658 Eli Waite International Finance – GSM 658 Eli Waite “A foreign currency option contract is a financial instrument that gives the holder the right but not the obligation to sell or buy currencies at a set price either on a specific date or before some expiration date.” (The Theory and Practice of International Financial Management, Click and Coval, 2002) Hedging Potential transactions Transactions that depend on something else Uncertain demand “Quantity Risk” Limit downside risk, but reap most of the upside. Call Options The right to buy a currency at the strike price Used to hedge foreign currency outflows Put Options The right to sell a currency at the strike price Used to hedge foreign currency inflows Contract Size = 10,000 foreign currency units (1,000,000 Yen) (Source: /products/wco_faq.html#3) Expiration, the third Friday of the expiration month. (Source: /products/product_specs.html) American Options – Can be exercised ANYTIME before maturity. European Options – Can ONLY be exercised at maturity. Source: (/wikipedia/en/d/d1/PutOption.png) Source: (/wikipedia/en/7/7f/CallOption.png) Strike Price? Maturity? American or European? Philadelphia Exchange / International Finance: GSM 658 Eli Waite International Finance: GSM 658 Eli Waite International Finance: GSM 658 Eli Waite International Finance: GSM 658 Eli Waite International Finance: GSM 658 Eli Waite International Finance: GSM 658 Eli Waite International Finance: GSM 658 Eli Waite International Finance: GSM 658 Eli Waite * *