Find the Hedge Ratio for a Call Option on £10,000

question 41

Multiple Choice

Find the hedge ratio for a call option on £10,000 with a strike price of €12,500. The current exchange rate is €1.50/£1.00 and in the next period the exchange rate can increase to €2.40/£ or decrease to €0.9375/€1.00 .
The current interest rates are i_€ = 3% and are i_£ = 4%.
Choose the answer closest to yours.

• A)5/9
• B)8/13
• C)2/3
• D)3/8
• E)None of the above

---

Definitions:

Substance Dependence

A condition in which an individual persistently uses a drug or substance despite facing significant harmful consequences, typically involving a strong desire to take the drug and difficulties in controlling its use.

Substance Withdrawal

A set of symptoms that occur upon the abrupt reduction or cessation of intake of addictive substances.

Physiological

Pertaining to the functions and activities of living organisms and their parts.

Behavioral Symptoms

Observable actions or reactions of a person that are often a manifestation of a disease or condition.