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So I was going through this question where a company’s finance director has found a hedging method through OTC options in a foreign country ($).
The exercise price is qouted in $ per euro(base country).
As we are hedging for the receipts in $, shouldn’t we be buying euros (call option)?
The solution to the question says that we are selling the dollars thus it’s a pucharse of a put option.
What is the correct way of determining this?
Please tell me the name and date of the past question (because I need to check the wording).
Hi,
The question is in March/June 2017 AFM sample paper.
The question is on Buryecs Co (25 marks)
The question says that they are OTC options in Wirtonia $’s. We are receiving $’s and therefore need to sell $’s (to buy euros) and therefore need a put option in dollars.
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