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kindly assist me on this:
when asked to use options as a method of hedging against currency risk, are we supposed to use only one exercise price or base our calculation on all exercise prices given in the question.
according to my local tutor providers we are supposed to use one exercise price but according to the BPP exam kit answers all exercise prices are used.If you have plenty of time then you should show for all exercise prices and suggest which might be preferable.
However, just showing how it works with one exercise price will get you most of the marks.(BPP have to show all the exercise prices – both to have a ‘perfect’ answer, and also for people to be able to check against)
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