Suppose That You Have Written a Call Option on €10,000

question 43

Multiple Choice

Suppose that you have written a call option on €10,000 with a strike price in dollars.Suppose further that the hedge ratio is ¹/₂.Which of the following would be an appropriate hedge for a short position in this call option?

• A)Buy €5,000 today at today's spot exchange rate.
• B)Agree to buy €5,000 at the maturity of the option at the forward exchange rate for the maturity of the option that prevails today .
• C)Buy the present value of €5,000 discounted at i€ for the maturity of the option.
• D)Agree to buy €5,000 at the maturity of the option at the forward exchange rate for the maturity of the option that prevails today or buy the present value of €5,000 discounted at i€ for the maturity of the option.

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Definitions:

Daytime Thinking

Cognitive processes and activities that occur during the day, including problem-solving, decision-making, and planning.

Hypnosis

A mental state of heightened suggestibility, often induced by a hypnotic induction technique, which can lead to changes in perception, memory, and voluntary action.

Hypnotized

The state of being under the influence of hypnosis, characterized by altered consciousness and responsiveness to suggestion.

Memory Accuracy

The degree to which remembered information reflects the true events or facts, often influenced by various factors.