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Explain How the Risks Differ for Holders and Writers of Foreign

question 21

Essay

Explain how the risks differ for holders and writers of foreign exchange options. Additionally, describe the difference between American and European options. Finally, how is the intrinsic value of an option calculated?


Definitions:

Self-Actualization

The realization or fulfilment of one's talents and potentialities, considered as a drive or need present in everyone.

Physiological Needs

are the basic physical requirements for human survival, such as air, water, food, shelter, and sleep, forming the base of Maslow's hierarchy of needs.

Belongingness Needs

The innate human need to feel connected and accepted by others, often considered a fundamental human motivation.

Alderfer's Existence Needs

A component of Clayton Alderfer's ERG theory, focusing on the basic physical and material well-being requirements akin to Maslow's physiological and safety needs.

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