ECONOMICS
FINANCIAL MARKETS
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
A currency call option provides the right to buy a specific currency at a specific price (called the strike price or exercise price) within a specific period of time.
|
|
|
A currency put option provides the right to sell a specific currency at a specific price within a specific period of time.
|
|
|
Currency call and put options offer more flexibility than forward or futures contracts because they are not obligations
|
|
|
A currency put option t is used to hedge future receivables instead it is used to hedge future payables.
|
Detailed explanation-1: -Call option will be used by exporters with respect to currency option is wrong. Call options are financial contracts that give the option buyer the right, but not the obligation, to buy a stock, bond, commodity or other asset or instrument at a specified price within a specific time period.
Detailed explanation-2: -Call Option and Put Option A call option provides the buyer with the right to buy a currency at the strike price. A put option provides the buyer with the right to sell a currency at the strike price. Buying a call on USD is the same as buying a put on the CAD because in both cases, the buyer is selling CAD for USD.
Detailed explanation-3: -A currency option has an advantage over the forward contract since an option protects the investor against downside risk while allowing the investor to benefit from upside potential.
Detailed explanation-4: -Currency options give investors the right, but not the obligation, to buy or sell a particular currency at a pre-specific exchange rate before the option expires. Currency options allow traders to hedge currency risk or to speculate on currency moves.