NO.PZ2022123002000025
问题如下：
Evelyn Weismann, a CFA
Level I candidate, is a research analyst at Bay Area Investments, which
specializes in derivatives and currency management. Bluerock Holdings, a
US-based firm and an institutional client of Bay Area, is looking to increase
its footprint in international markets. Bluerock is in the process of
conducting due diligence to acquire Concord Associates, which is domiciled in
London. Concord Associates has overall holdings amounting to GBP 400 million.
Liam Mason, CEO of Bluerock, meets with Weismann and expresses his intention to
mitigate the GBP currency risk before closing on the acquisition of Concord. Weismann
makes the following three recommendations:
Recommendation
1: Implement an ATM call option on GBP/USD to
protect the exposure against appreciation of the base currency.
Recommendation
2: Implement a risk reversal strategy by buying an
ATM GBP/USD call option and buying an OTM GBP/USD put option.
Recommendation
3: Use a knock-in/knock-out option to receive an
all-or-none asymmetric payoff when the exchange rate touches a pre-specified
level.
Which
of Weismann’s recommendations is most likely correct?
选项：
A.
Recommendation 1
B.
Recommendation 2
C.
Recommendation 3
解释：
Correct Answer: A
Recommendation 1
is correct.
If the base
currency, USD, is appreciated against GBP, then the Concord Associates’
holdings of GBP 400 million will buy fewer USD in the future when the
acquisition is completed.
The hedge is
implemented in protecting against an appreciation of the base currency of the
P/B quote, the USD. The hedge is established with an ATM call option (a long
position in the USD).
P/B refers to the
price of one unit of the base currency, “B,” expressed in terms of the price
currency, “P.”
Recommendation 2
is incorrect.
Risk reversal,
also referred to as a collar strategy, is created by buying stock and by
simultaneously buying puts to protect the position against downside risk and
selling calls to offset the cost.
Recommendation 3
is incorrect.
All-or-none
asymmetric payoff is characteristic of a binary option and not a
knock-in/knock-out option.
建议三不对的原因是hedge范围比较有限吗
