Q: Why would anyone write an option, knowing that the gain from
Why would anyone write an option, knowing that the gain from receiving the option premium is fixed but the loss if the underlying price goes in the wrong direction can be extremely large?
See AnswerQ: Once an option has been purchased, only two prices or rates
Once an option has been purchased, only two prices or rates are part of the holder's decision making process. Which two and why?
See AnswerQ: The cash flows associated with a call option on euros by a
The cash flows associated with a call option on euros by a U.S. dollar based investor occur at different points in time. What are they and how much does the time element matter?
See AnswerQ: How is expropriation risk factored into the capital budgeting analysis of a
How is expropriation risk factored into the capital budgeting analysis of a foreign project?
See AnswerQ: The value of an option is stated to be the sum of
The value of an option is stated to be the sum of its intrinsic value and its time value. Explain what is meant by these terms.
See AnswerQ: An option's value declines over time, but it does not do
An option's value declines over time, but it does not do it evenly. Explain what that means for option valuation.
See AnswerQ: Options are often described as in-the-money, at
Options are often described as in-the-money, at-the-money, or out-of-the-money. What does that mean and how is it determined?
See AnswerQ: What is the relationship or link between the forward rate and the
What is the relationship or link between the forward rate and the foreign currency option premium?
See AnswerQ: Some forecasters believe that foreign exchange markets for the major floating currencies
Some forecasters believe that foreign exchange markets for the major floating currencies are “efficient” and forward exchange rates are unbiased predictors of future spot exchange rates. What is meant...
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