chapter 5
FX Options: Concepts
LEARNING OBJECTIVES
This chapter introduces readers to the basic concepts of foreign exchange (FX) options with detailed illustrations. Reading and analysis of the extensive illustrations provided in this chapter is essential for all those who are new to the world of options. The contents of this chapter are organized in the following order:
2. Option Definitions (From Currency Perspective)
INTRODUCTION
As discussed in Chapter 3, hedging is like ‘securing a rate or freezing a certain rate for foreign currency receivable/ payable’. Once a person has hedged his exposure at a particular price, any subsequent rise or fall in exchange rate ...
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