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Hi John,
I’ve seen a few questions in the BPP revision kit where instead of comparing options exercise price with spot rate, the exercise price is compared with futures rate on deciding whether to exercise option or not.
Is it answerable either way or is there something that I’m missing?
For foreign exchange options we compare the exercise price with the spot rate.
For interest rate options we compare the exercise price with the future price (because they are options on futures).
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