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hi john
I would like to know which strike price to chose in options available , Suppose in a question we have 3 strike prices and in its requirement the examiner asked for evaluating the hedging options available . Is it better to make an assumption and select one strike price and save time or doing all will gain marks. I have seen questions where examiner has made an assumptions like,current spot rate is where we would like to cap it so that or closest one is the strike price and i have also seen him do all the strike prices to get the best one among them. And these questions i am talking about are about same 18-20 marks with all calculations of FRA , Futures and options and explanation. So whats the best strategy ? Is doing all the strike prices worth the time it takes keeping time consumption in mind .
ThanksMy aim would be to try and make sure that I got at least 50% on every part of each question.
With options it very much depends how you are going for time. The main thing is to prove you know how they work and so if you just do it for one exercise price then you will be getting more than 50% for that part of the question. If you find you can do it quickly then do it for all of the possible strike prices. Otherwise just do one (and leave the rest of the page blank so that you can come back and do more later if you find you have time left at the end of the exam).
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