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Dear Sir,
1. In acca exam official answers for M/J 2016 Lirio, when calculating the currency options
why the option is lapsed? (there is no calculation on profit from using the option).2. Is for futures you method of lock in rate used?
Thank You!
1. These are current options, not interest rate options, so they either exercise them and convert at the option strike price or let them lapse.
Here, they are better off converting at spot then at the strike price, so they let the options lapse.
2. Yes – the answer is using the lock-in rate.
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