Find the hedge ratio for a put option on $15,000 with a strike price of €10,000. In one period the exchange rate (currently S($/€) = $1.50/€) can increase by 60% or decrease by 37.5% .
A)-15/49
B)5/13
C)3/2
D)15/49

Question

Quizplus · Accepted Answer

The hedge ratio (delta) for a put option is calculated as (P- - P+) / (S- - S+), where P- and P+ are the put option values in the down and up states, and S- and S+ are the corresponding exchange rates. Calculating these values gives the hedge ratio as -15/49.

Find the Hedge Ratio for a Put Option on $15,000