Chapter 02 · Section 2.1
Exchange Rate Rise
Suppose that Victor expected a strong rise in the US/DM exchange rate. What kind of option would he logically purchase?
a) DM call options (quoted in US$).
b) DM put options (quoted in US$).
c) DM calls or puts (quoted in US$).
A DM call option gives the holder the right to buy a certain quantity of DM at a specified rate (exercise price) quoted on US$.
A DM put option gives the holder the right to sell a certain quantity of DM at a specified rate (exercise price) quoted on US$.