Exam 8: Foreign Currency Derivatives

Which of the following is NOT a difference between a currency futures contract and a forward contract?

Which of the following is NOT a factor in determining the premium price of a currency option?

Compare and contrast foreign currency options and futures. Identify situations when you may prefer one vs. the other when speculating on foreign exchange.

TABLE 7.1 Use the below mentioned table to answer following question(s). April 19, 2002, British Pound Option Prices (cents per pound, 62,500 pound contracts). -Refer to Table 7.1. The exercise price of ________ giving the purchaser the right to sell pounds in June has a cost per pound of ________ for a total price of ________.

A foreign currency ________ option gives the holder the right to ________ a foreign currency whereas a foreign currency ________ option gives the holder the right to ________ an option.

A foreign currency ________ contract calls for the future delivery of a standard amount of foreign exchange at a fixed time, place, and price.

TABLE 7.1 Use the below mentioned table to answer following question(s). April 19, 2002, British Pound Option Prices (cents per pound, 62,500 pound contracts). -Refer to Table 7.1. What was the closing price of the British pound on April 18, 2002?

Peter Simpson thinks that the U.K. pound will cost $1.43/£ in six months. A 6-month currency futures contract is available today at a rate of $1.44/£. If Peter was to speculate in the currency futures market, and his expectations are correct, which of the following strategies would earn him a profit?

An ________ option can be exercised only on its expiration date, whereas an ________ option can be exercised anytime between the date of writing up to and including the exercise date.

All exchange-traded options are settled through a clearing house but over-the-counter options are not and are thus subject to greater ________ risk.

The ________ of an option is the value if the option were to be exercised immediately. It is the options ________ value.

A speculator in the futures market wishing to lock in a price at which they could ________ a foreign currency will ________ a futures contract.

TABLE 7.1 Use the below mentioned table to answer following question(s). April 19, 2002, British Pound Option Prices (cents per pound, 62,500 pound contracts). -Refer to Table 7.1. The May call option on pounds with a strike price of 1440 means ________.

Which of the following is NOT a contract specification for currency futures trading on an organized exchange?

Your U.S firm has an accounts payable denominated in UK pounds due in 6 months. To protect yourself against unexpected changes in the dollar/pound exchange rate you should

________ volatility are calculated by being backed out of the market option premium values traded.

The maximum gain for the purchaser of a call option contract is ________ while the maximum loss is ________.

A put option on yen is written with a strike price of ¥105.00/$. Which spot price maximizes your profit if you choose to exercise the option before maturity?

A foreign currency ________ gives the purchaser the right, not the obligation, to buy a given amount of foreign exchange at a fixed price per unit for a specified period.

Which of the following is NOT true for the writer of a call option?