If You Purchase a Straddle on Euros, This Implies That

question 128

Multiple Choice

If you purchase a straddle on euros, this implies that you:

• A)finance the purchase of a call option by selling a put option in the euros.
• B)finance the purchase of a call option by selling a call option in the euros.
• C)finance the purchase of a put option by selling a put option in the euros.
• D)finance the purchase of a put option by selling a call option in the euros.
• E)none of the above

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Definitions:

Foreign Currency

Currency used in a country other than one's own, involved in international transactions or investment opportunities.

Home Currency

The currency in which a country conducts its principal economic activities and in which domestic financial statements are reported.

Exchange Rate Risk

The possibility of losing value in international financial transactions due to fluctuations in the currency exchange rates.

Manage Exchange Rate

Strategies or practices employed by individuals, businesses, or countries to mitigate or take advantage of fluctuations in exchange rates.