Currency-Translated Options Have

question 26

Multiple Choice

Currency-translated options have

• A) only asset prices denoted in a foreign currency.
• B) only exercise prices denoted in a foreign currency.
• C) payoffs that only depend on the maximum price of the underlying asset during the life of the option.
• D) either asset or exercise prices denoted in a foreign currency.

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Definitions:

Eurodollars

US dollars deposited in banks outside the United States, often used for international transactions and investing.

Dollar-Denominated Deposits

Bank deposits made in U.S. dollars rather than the local currency, often used by investors to avoid foreign exchange rate risk.

Foreign Bank

A bank based in a country other than the country it provides services in, often subject to both domestic and international banking regulations.

Value-Weighted Index

An index in which the weight of each constituent is proportional to its market value, emphasizing larger companies.