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Sir in this question while using otc option, examiner has said purchase call option,i just want to clarify my reasoning is it because they r receiving money in ZP and because our base currency or we can say contract currency is euro,so they need to sell zp and buy euro,or any other reason please tell me.
My second question is it correct that everything is exposed to risk apart from those which we r expecting in euro,and is this always the case or any other reason. Thanks
They are OTC options and so there is no contract size (or contract currency therefore). Euro call options are the right to buy Euros, Euro put options are the right to sell Euros. Here we need to sell ZP, therefore buy Euros, therefore call options.
The risk of changes in exchange rates is relevant to all transactions that are not in our own currency.
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