Purchase Solution

Use of call option for hedging

Not what you're looking for?

Ask Custom Question

A hedger buys a call option on sterling for $0.06/£ at an exercise price of $1.80 per £. What is the worst exchange rate that can be achieved? Is that a sensible way for a hedger to consider an option?

Purchase this Solution

Solution Summary

Answers a question on use of call option for hedging.

Solution Preview

The worst rate that can be achieved is $1.86 per £, that being equal to the $1.80 exercise price plus the premium of $0.06 . This view is perfectly sensible as ...

Purchase this Solution


Free BrainMass Quizzes
MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Operations Management

This quiz tests a student's knowledge about Operations Management

Learning Lean

This quiz will help you understand the basic concepts of Lean.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.