Q. Is Campos most likely correct that Strategy 1 and Strategy 2 will accomplish the goals of exploiting market views and reducing hedging costs?
No, she is incorrect about reducing hedging costs.
No, she is incorrect about exploiting market views.
Yes.
老师,这道题答案是B。首先题目说的使用put option,两个策略都使用了,但是关于对market view的讨论,没有什么思路,求老师帮忙讲解一下。
官网答案如下:
B is correct. Campos suggests that both strategies help reduce hedging costs and allow the manager to exploit a market view. While it is true that both strategies help reduce hedging costs through premiums collected on short calls and puts, they both do not exploit the market view on the currencies, specifically, Strategy 1 does not. Exhibit 3 indicates that the expectation is for the AUD to depreciate to BRL/AUD 2.0355 and for the CHF to appreciate to BRL/CHF 2.5642. Strategy 1, the short seagull on the AUD, only provides downside protection to BRL/AUD 2.1006 (when the short put kicks in and neutralizes the hedge), not BRL/AUD 2.0355. Under Strategy 2, the expectation is for an appreciation to BRL/CHF 2.5642; here the option premium is pocketed and because the option is written with a strike of BRL/CHF 2.5669, it will expire worthless if the rate never gets to BRL/CHF 2.5669.