A long put on pound sterling with a striking price of K^$/£ = $1.25/£ is ______.

Question

Quizplus · Accepted Answer

A long put on a currency gives the holder the right, but not the obligation, to sell the currency (in this case, pound sterling) at a specified price (strike price). This is equivalent to a long call on the other currency (dollars) at the reciprocal of the strike price, which in this case is £0.80/$, because it gives the holder the right to buy dollars at a specified rate.

A Long Put on Pound Sterling with a Striking Price