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Derivatives and Risk Management by Sundaram Janakiramanan

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11

Fundamentals of Options

LEARNING OBJECTIVES

After completing this chapter, you will be able to answer the following questions:

  • What is an options contract?

  • What are call options and put options?

  • What is an option premium, exercise price, and exercise date?

  • What are American and European options?

  • What are the uses of options?

  • How to trade options on exchanges and over-the counter markets?

  • What are the protections for corporate actions for exchange-traded options?

BOX 11.1 Companies May Get to Write Currency Options

In order to help Indian companies to reduce currency derivatives losses, Reserve Bank of India (RBI) has suggested that companies should be allowed to write currency options. According to RBI guidelines, importers and exporters ...

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