Risk management-hedging, Mr. Goodie holds American put

Risk management-hedging

Reference no: EM1346055

1. Mr. Goodie holds American put options on Delta Triangle stock. The exercise price of the put is $40 and Delta stock is selling for $35 per share. If the put sells for $4.5, what is the best strategy for Mr. Goodie?

2. A classmate of yours recently entered the import/export business. During a visit with him last week, he said to you, "If you play the game right, this is the safest business in the world. By hedging all my transactions in the foreign-exchange futures market, I eliminate all risk." Do you agree with your friend's assessment of hedging? Why or why not?

Reference no: EM1346055

Questions Cloud

Explaining use of encryption-virus and vpn : Write down the suitable example of best use of Encryption, Virus, VPN, Firewall securities, when and explain why?

Illustrate what are the interest rates : Consider a monopolist informal moneylender and competitive formal creditors who lend to farmers. illustrate what are the interest rates.

What wavelength of light in the visible region transmitted : A blacksmith heats a 1.9 kg iron horseshoe to 480 degree C, then plunges it into a bucket containing 10kg of water at 20 degree C. The specific heat of iron is 447 J/kgK. What is the final temperature.

Prepare effective project communications systems : Prepare effective project communications systems to keep stakeholders informed of project status.

Risk management-hedging : Mr. Goodie holds American put options on Delta Triangle stock. The exercise price of the put is $40 and Delta stock is selling for $35 per share. If the put sells for $4.5, what is the best strategy for Mr. Goodie?

Develop a communication plan : Prepare a project plan that covers all project groups and knowledge areas and separate tasks into sub-tasks, and a work package with stated durations and order of precedence.

What would volume of output would the two alternative yield : what would volume of output would the two alternative yield the same profit 3-if expected annual demand is 12000 units which alternative would tield the higher profit.

Compute the magnitude of the electric field : What is the pressure (in kPa) exerted by an object that has a base which is 2cm by 4cm nd a weight of 45N.

Discuss concepts of risk and management : Risk lies at all levels of business activity. There are many different kinds of risks within an management as well as ways to manage risks.

User Account

All Pages