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Hello
I have few doubt in bpp kit as 52
When I make matrix multi netting ..u don’t get same numbers as 110000 $ for payment and $ 97000 for receipts ..also qs does not specifically says in which currency we should convert all amounts and they are simply netting amounts as they are given in qs without using currency exchange rate .I am quite confused with the approach of answer …although I understand all numbers
Then for option it does not say for which transaction ( payment /recept,) I do options …but answer does it for payments .how I should know which transaction I do option for
One more point that options in this qs are OTC options ?? Am I right
All multi-lateral netting is, is netting off the transactions in each of the currencies involved so that the group is ending up with only one net transaction in each of the currencies. Then you can start looking at ways of hedging the risk of the net transaction in each of the foreign currencies.
We do not convert the individual transactions unless the question specifically tells you that they have decided to do that.The options are not OTC – they are traded options (you know that because they have given the table showing the different strike prices available, the different months available, and there is a contract size quoted. OTC options are quoted directly the amount that we want to use the options on.
You have not watched my lectures on foreign exchange risk management, and you cannot expect me to spend time typing out my lectures if you cannot be bothered to spend time watching the lectures. I explain in the lectures how to decide whether you need to buy a put option or buy a call option.
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