Consider the Following Hypothetical Foreign Exchange Portfolio

question 26

Multiple Choice

Consider the following hypothetical foreign exchange portfolio.What are the daily earnings at risk for the portfolio?

• A)$200 / 0.45 = $444.44
• B)$200 * 0.45 = $90.00
• C)($200 / 0.45) / 100 = $4.44
• D)($200 * 0.45) / 100 = $0.90

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Definitions:

Call Option

A fiscal arrangement allowing the buyer to purchase an asset at an agreed-upon price within a certain period, without the requirement to proceed with the purchase.

Call Premium

The amount by which the price of a call option exceeds its intrinsic value, often reflecting the time value of the option.

Put Option

An agreement in finance allowing the owner to sell a certain quantity of an underlying asset at a set price during a specific period, without being compelled to do so.

Strike Price

The pre-determined price at which the holder of an option can buy (in the case of a call option) or sell (in case of a put option) the underlying asset.