Finance instruments Introduction Currency Vanilla options Currency Barrier
Finance instruments Introduction Currency Vanilla options Currency Barrier options 1
Introduction Call option um t No de clu i rem Payoff p in k LONG CALL ST Long position = The holder have the right to purchase the underline asset = Paying a premium 2
Introduction Call option Payoff ium rem p e lud No c t in K ST SHORT CALL Short position = The writer obligate to sell the underline asset = Getting a premium 3
Introduction Put option um t No de clu i rem Payoff p in k ST LONG PUT Long position = The holder have the right to sell the underline asset = Paying a premium 4
Introduction Put option um t No de clu i rem Payoff p in k ST SHORT PUT Short position = The writer obligate to buy the underline asset = Getting a premium 5
Introduction Summary IM E U CL T NO UM Payoff PR IN K ST The options allow us to split /brake the risk of the underline asset 6
Currency derivatives Buying call Euro put Ils Ex am ple Spot: 3. 5406 1, 000 : ILS Amount Premium : %2 Expiry : 3 months 0 Strike: 3. 7 7
Currency derivatives Buying call Euro put Ils Th IF EUR < 3. 7 The option will expired ree mo nth s la ter EUR > 3. 7 The option will be exercised 8
Currency derivatives Buying call Euro put Ils Euro Sen siti ILS profits vit ya nal ysi Euro>3. 774 =3. 7 x(1. 02)= breakeven Euro<3. 7 9 s
Currency derivatives Buying call Euro put Ils Gr aph payoff Ils ica l pr ese nta tio n 3. 7 %2 (20, 000) 3. 774 Euro 10
Currency derivatives Collar option LO NG Buying $ CALL strike X Selling $ PUT strike Y X>Y The two options for the same expiry date 11
Currency derivatives Collar option Ex am ( % Buying $ call, Ils put strike 4. 06 ( 2 ple ( % Selling $ put, Ils call strike 3. 957 ( 1. 5 12
Currency derivatives Collar option Gr aph Payoff Ils 3. 957 %0. 5 ica l pr ese nta tio n 4. 06 4. 0803 $ 13
Currency derivatives Collar option nsi Se ity tiv ana lys is 14
Currency derivatives Bull spread Ex am Payoff Bull Spread ple Buying call strike 4. 1 - with Call (%0. 5) Selling call 4. 2 (%0. 3) %0. 2 4. 1 4. 2 $ The same expiry date 15
Currency derivatives Bear spread Buying call strike Y Selling call strike X Bear Spread OR Buying put strike Y Selling put strike X Payoff The same expiry date X Y The same expiry date 16
Currency derivatives Covered call $ $ Buying forward / ¥ Delivery : 3 months ¥/ Forward rate 106. 5 17
Currency derivatives Covered call $ Writing $ call ¥ put ¥/ getting premium 18
Currency derivatives Covered call Sen siti vit ya nal 19 ysi s
Currency derivatives Covered call Gr aph payoff ¥ 30, 527 ica l pr ese nta tio n 106. 5 108. 4 $ 20
Exotic option Barrier options De Option that have an embedded price level ( barrier ), which if reached will either create a vanilla option fin i tio n or eliminate the existence of a vanilla option 21
Exotic option Barrier options Barrier is out-of-the money option with respect to the strike Ex am ple Dollar Call / Canadian Put strike 1. 55 expiring in 1 month that has a knock out trigger at 1. 50 Spot rate: 1. 54 22
Exotic option Barrier options Ex ple payoff am TRIGGER 1. 54 1. 50 1. 55 $ 23
Exotic option Barrier options Barrier is out-of-the money option with respect to the strike Ex am ple Dollar Call / Canadian Put strike 1. 55 expiring in 1 month that has a knock in trigger at 1. 50 Spot rate: 1. 54 24
Exotic option Barrier options Ex ple payoff am TRIGGER 1. 54 1. 50 1. 55 $ 25
Exotic option Barrier options Re Barrier is in-the -money option with respect to the strike ver se kno ck out Dollar Call / Canadian Put strike 1. 50 expiring in 1 month that has a knock out trigger at 1. 56 Spot rate: 1. 54 26
Exotic option Barrier options ver payoff Re se kno ck out TRIGGER 1. 50 1. 54 1. 56 $ 27
Exotic option Barrier options Barrier is in-the -money option with respect to the strike Re ver se kno ck Dollar Call / Canadian Put strike 1. 50 expiring in 1 month that has a knock in trigger at 1. 56 Spot rate: 1. 54 28 in
Exotic option Barrier options payoff Re ver se kno ck TRIGGER 1. 50 1. 54 1. 56 $ 29 in
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