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To identify the basic factors that determine the value of a currency option.
Step by step
Solved in 3 steps
- Define spot, forward, and swap transactions in the foreign exchange market and give an example of how each could be used.Explain the basic differences between the operation of a currency forward market and a futures market. Then, discuss the main difference in the obligation of one with a long position in futures (or forward) contract in comparison to an options contractDefine currency swap
- Compare and contrast a currency forward contract and a currency futures contractExplore the concept of arbitrage on the currency exchange markets and critically evaluate with examples.Explain the foreign currency swaps and why are they undertaken? Explain the functional currency and what is a presentation currency.