University:
McMaster University
Course:
COMMERCE 3FC3 | International Finance
Academic year:

2022
Views:

103

Pages:

2
Author:

Sabrina S.

Which are characteristics of forward contracts? 1. Delivery of the asset is commonly made. 2. They are derivatives. Futures contracts are marked-to- settlement price. on a daily basis at the new Market The price paid for an option is referred to as its Premium •Options that are tailor made according to the specifications of the buyer in terms of maturity length, exercise price, and the amount of the underlying currency are traded Over the Counter The potential loss for the buyer of a call option is potential loss for the seller (or writer) of a call option is and the The call premium; Unlimited. A Contract is a vehicle for buying or foreign exchange Selling a stated amount of at a stated price per unit at a specified time in the future that is brokered over-the-counter. Forward Which of the following are true of futures contracts? 1. They have standardized features. 2. They are exchange-traded. 3. They are derivatives. The lower bound of the market value of a European foreign currency call option will increase, or at least not decrease, with increases in which of the following? 1. The price of the underlying asset St 2. The U.S. interest rate rs An option provides the asset for a stated price over a but not the stated period of time. to buy or sell an underlying Right, Obligation How are currency options traded? Both OTC and on exchanges. Suppose that there are a call option and a put option each with exercise price E. If STE at expiration, which of the following is true? Both the put and the call are at the money The lower bound of the market value of a European foreign currency put option will increase, or at least not decrease, with increases in which of the following? 1. The exercise price E 2. The foreign interest rate ri A(n) option can be exercised option, but a(n) any time at or before the maturity of the option can be exercised only at the maturity of the option. American European Which of the following is true of over-the-counter currency options? 1. They are written for large amounts. 2. They are typically European options.