NO.PZ2022123002000022
问题如下：
One of the non-EUR currency
exposures in the Portfolio is GBP. Aron frequently adjusts his GBP positions
based on his short-term tactical outlook. Aron forecasts that the GBP will
appreciate by 5% against the USD over the next six months. The current USD/GBP
rate is 1.60 (1 GBP = 1.60 USD). Aron is considering the following six-month
European option positions with the primary objective of increasing his GBP
exposure in line with his forecast, and a secondary objective of minimizing the
initial cash outlay:
Trade 1: Buy call with 1.68 strike
Sell call with 1.72 strike
Trade 2: Buy call with 1.60 strike
Sell call with 1.68 strike
Trade 3: Buy call with 1.60 strike
Sell call with 1.72 strike
Determine the
trade that will most likely satisfy Aron’s objectives at expiration. Justify
your response.
选项：
解释：
Correct Answer:
Trade 2 would be
the most likely to satisfy Aron’s objectives. By buying a call struck at the
current spot rate (1.60), Aron will benefit if GBP appreciates per his outlook.
Selling the higher strike price out-of-the-money call at 1.68 (equal to his 5%
appreciation expectation) would provide some premium income to reduce the cost
of the trade, while not reducing his potential appreciation below 5%.
Trade 1 is
ineffective because it does not provide upside exposure between the current
spot of 1.60 and the current spot plus 5% of the expected 1.68, on expiration
date.
Trade 3 is less
effective than Trade 2 because the premium income from selling the call with a
1.72 strike is less than that from selling a call with a 1.68 strike. This
trade is less effective at satisfying Aron’s secondary objective, which is to
minimize the initial cash outlay.
Trade 2 is most suitable.
The primary objective of increasing his GBP exposure in line with his forecast, and a secondary objective of minimizing the initial cash outlay. He estimated a appreciate of 5% against the USD over the next six months so the final currency rate would be around 1.68 USD/BDP. Having a positive view of USD appreciation, he can long call of GBP ATM in order to gain all the benefit for the appreciation. So the first objective fulfilled. For the second objective, he estimated the maximum of GBP appreciation would be 5% so he could sell a call at 1.68 USD/BDP in order to minimize the initial cash outlay. This Option has a low possibility of reaching to its strike price so the second objective fulfilled.
