What is a lookback call option?

Also known as a hindsight option, a lookback option allows the holder the advantage of knowing history when determining when to exercise their option. This type of option reduces uncertainties associated with the timing of market entry and reduces the chances the option will expire worthlessly.

What do you mean by currency options?

A currency option (also known as a forex option) is a contract that gives the buyer the right, but not the obligation, to buy or sell a certain currency at a specified exchange rate on or before a specified date. For this right, a premium is paid to the seller.

What are some disadvantages of currency option contracts?

Disadvantages of currency options: They can be illiquid. Quickly become worthless. Risk is potentially unlimited (if you are a seller)

Which of the following statement is incorrect about currency options?

Solution(By Examveda Team) Call option will be used by exporters with respect to currency option is wrong. Call options are financial contracts that give the option buyer the right, but not the obligation, to buy a stock, bond, commodity or other asset or instrument at a specified price within a specific time period.

What is meant by call option?

What Is a Call Option? Call options are financial contracts that give the option buyer the right, but not the obligation, to buy a stock, bond, commodity, or other asset or instrument at a specified price within a specific time period. A call buyer profits when the underlying asset increases in price.

What is digital call?

A digital call center is a customer service operation that provides support for its customers through digital channels such as email, chat, text (SMS), social media, and more. Organizations typically transform their call centers into digital call centers in response to customer demand.

Can you buy options on currency?

There are two types of options primarily available to retail forex traders for currency options trading. Both kinds of trades involve short-term trades of a currency pair with a focus on the future interest rates of the pair. The traditional (“vanilla”) call or put option.

What is the disadvantage of option?

The Disadvantages of Options Trading: 1) The cost of trading options can be higher on a percentage basis than trading the underlying stocks. 2) Options are so complex that it requires a close observation and maintenance. 4) Options will expire at a fixed point in time and lead to most trading expire worthless.

What is forward premia curve?

The FBIL Forward Premia curve encompasses 13 tenor points consisting of an O/N tenor, followed by rolling month tenor points, from 1 month to 12 months. The O/N premia is computed from Cash-Tom Swaps pairs, while the rolling month tenor points are computed from Spot-Forward Swap pairs.

What is exchange margin?

An exchange rate margin, sometimes referred to as an “international conversion margin” or a “foreign exchange margin”, is the percentage difference between the exchange rate at which banks and currency exchange services trade and the exchange rate offered to consumers.

How does a look back option work in finance?

Lookback option. Lookback options, in the terminology of finance, are a type of exotic option with path dependency, among many other kind of options. The payoff depends on the optimal (maximum or minimum) underlying asset’s price occurring over the life of the option. The option allows the holder to “look back” over time to determine the payoff.

How are lookback options traded over the counter?

Lookback options do not trade on major exchanges. Instead, they are unlisted and trade over-the-counter (OTC). Lookback options are cash settled options, which means the holder receives a cash settlement at execution based on the most advantageous differential between high and low prices during the purchase period.

What does it mean to have currency option?

A currency option (also known as a forex option) is a contract that gives the buyer the right, but not the obligation, to buy or sell a certain currency at a specified exchange rate on or before a specified date.

Which is the payoff function for a lookback call?

The payoff functions for the lookback call and the lookback put, respectively, are given by: is the strike price. Using the Black–Scholes model, and its notations, we can price the European lookback options with floating strike. The pricing method is much more complicated than for the standard European options and can be found in Musiela.