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Good day Sir,
The C part of this question was to hedge $7500m using currency options and they bought put options but we don’t know if we have dollar options or not . How do I know what option to buy in this situation?
Thank you.
The question says that they are OTC options in $’s.
Therefore the options are the right to buy or sell $’s at the fixed rates. (Although there is no contract size, because they are OTC, it is the same ‘rule’ that we use for traded options as if the contract size was quoted in $’s).They are receiving $’s and therefore will need to sell $’s, and therefore they will buy $ put options.
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