Asked by Amanda Herrera on May 12, 2024
Verified
Currency-translated options have
A) only asset prices denoted in a foreign currency.
B) only exercise prices denoted in a foreign currency.
C) payoffs that only depend on the maximum price of the underlying asset during the life of the option.
D) either asset or exercise prices denoted in a foreign currency.
Currency-Translated Options
Options that involve the right to buy or sell a specified amount of one currency for another at a predetermined exchange rate during a specified period.
Foreign Currency
The money or currency used in a country different from one's own, involved in international trading and investment.
- Describe exotic options and their characteristics.
Verified Answer
YG
Yajaira GonzálezMay 17, 2024
Final Answer :
D
Explanation :
Currency-translated options can have either the asset prices or the exercise prices denoted in a foreign currency, allowing for flexibility in how they are structured to meet the needs of investors looking to hedge against currency risk or speculate on currency movements.
Learning Objectives
- Describe exotic options and their characteristics.