Finquiz Essay type Exam 1
The company has a long 100 $ put options with expiration in six months at a strike price of $100/€ and a contract size of 9.5mill. The current rates is 101.5/€
Calculate the amount at risk from a credit loss on the long MXN put option contract. Determine which party bears the credit risk
All credit risk on options is on the log side of the contract (**I understand and I am aware of this)
If rates remain unchanged then risk =
(1/100)-(1/101.5)=0.000244*$9.5 mill * 100 contracts = EUR 1,403,941
Or EUR 14,040 per contract
I have absolutely lost on the calculation, not understood a bit.
If anyone has the time and patience, please help.