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Question: Forex Derivatives

Suppose the current dollar-pound exchange rate is 1.60 and a US firm expects payment for a shipment of goods to the United Kingdom in 6 months of GBP 2.4 million. The 6-month pound denominated call option on the dollar has a GBP 0.65 strike price, and is assumed to cost nothing. With numerical analysis explain what the firm would do if it purchases the 6 month call options and when it gets paid in 6 months the exchange rate at the time remains at 1.60.

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Category:- Basic Finance
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