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I have gone through the lecture of Interest Hedge but could not get my head around about the examiners answer particularly this bit:
Assume that interest rates increase by 0·8% (80 basis points) to 4·4%
Buy put Sell call
Exercise price 95·50 96·00
Futures price 95·44 95·44
Exercise?* Yes No
Why the second one will not be exercised? Could you plz help?
I am away from home tonight and so am unable to check the question. I am back tomorrow so please ask me again tomorrow and I will then answer 🙂