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Finance instruments

Finance instruments. *. Introduction. *. Currency Vanilla options. *. Currency Barrier options. Payoff. k. ST. LONG CALL. Introduction. Call option. Not include premium. Long position = The holder have the right to purchase the underline asset = Paying a premium. Payoff.

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Finance instruments

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  1. Finance instruments * Introduction * Currency Vanilla options * Currency Barrier options

  2. Payoff k ST LONG CALL Introduction Call option Not include premium Long position = The holder have the right to purchase the underline asset = Paying a premium

  3. Payoff SHORT CALL K ST Introduction Call option Not include premium Short position = The writer obligate to sell the underline asset = Getting a premium

  4. Payoff k ST LONG PUT Introduction Put option Not include premium Long position = The holder have the right to sell the underline asset = Paying a premium

  5. Payoff k ST SHORT PUT Introduction Put option Not include premium Short position = The writer obligate to buy the underline asset = Getting a premium

  6. Payoff Payoff ST ST Payoff Payoff ST ST K Introduction Summary NOT INCLUE PRIMUM The options allow us to split /brake the risk of the underline asset

  7. Currency derivatives Buying call Euro put Ils Example Spot: 3.5406 1,000,000 : ILS Amount Premium : %2 Expiry : 3 months 0Strike: 3.7

  8. Currency derivatives Buying call Euro put Ils IF Three months later EUR < 3.7 The option will expired EUR > 3.7 The option will be exercised

  9. Euro ILS profits Euro>3.7 Euro<3.7 Currency derivatives Buying call Euro put Ils Sensitivity analysis 3.774 =3.7x(1.02)= breakeven

  10. payoff Ils 3.7 Euro %2 3.774 (20,000) Currency derivatives Buying call Euro put Ils Graphical presentation

  11. Currency derivatives Collar option LONG Buying $ CALL strike X Selling $ PUT strike Y X>Y The two options for the same expiry date

  12. Currency derivatives Collar option Example 1 ( % Buying $ call, Ils put strike 4.06 ( 2 2 ( % Selling $ put, Ils call strike 3.957 ( 1.5

  13. Payoff Ils 3.957 4.06 4.0803 $ %0.5 Currency derivatives Collar option Graphical presentation

  14. Currency derivatives Collar option Sensitivity analysis

  15. Payoff Bull Spread with Call 4.1 4.2 Currency derivatives Bull spread Example Buying call strike 4.1 -(%0.5) Selling call 4.2 - (%0.3) $ The same expiry date %0.2

  16. Buying call strike Y Selling call strike X Bear Spread The same expiry date Buying put strike Y Selling put strike X Y X The same expiry date Currency derivatives Bear spread 1 OR Payoff 2

  17. Currency derivatives Covered call ¥ / $ 1 ¥/ $ Buying forward Delivery : 3 months Forward rate 106.5

  18. Currency derivatives Covered call 2 ¥ / $ Writing $ call ¥ put getting premium

  19. Currency derivatives Covered call Sensitivity analysis

  20. payoff ¥ 30,527 106.5 108.4 $ Currency derivatives Covered call Graphical presentation

  21. Exotic option Barrier options Definition Option that have an embedded price level ( barrier ), which if reached will either create a vanilla option or eliminate the existence of a vanilla option

  22. Exotic option Barrier options Barrier is out-of-the -money option with respect to the strike Example Dollar Call / Canadian Put strike 1.55 expiring in 1 month that has a knock out trigger at 1.50 Spot rate:1.54

  23. Exotic option Barrier options Example payoff TRIGGER 1.54 $ 1.50 1.55

  24. Exotic option Barrier options Barrier is out-of-the -money option with respect to the strike Example Dollar Call / Canadian Put strike 1.55 expiring in 1 month that has a knock in trigger at 1.50 Spot rate:1.54

  25. Exotic option Barrier options Example payoff TRIGGER 1.54 $ 1.50 1.55

  26. Exotic option Barrier options Barrier is in-the -money option with respect to the strike Reverse knock out Dollar Call / Canadian Put strike 1.50 expiring in 1 month that has a knock out trigger at 1.56 Spot rate:1.54

  27. Exotic option Barrier options Reverse knock out payoff TRIGGER $ 1.54 1.56 1.50

  28. Exotic option Barrier options Barrier is in-the -money option with respect to the strike Reverse knock in Dollar Call / Canadian Put strike 1.50 expiring in 1 month that has a knock in trigger at 1.56 Spot rate:1.54

  29. Exotic option Barrier options Reverse knock in payoff TRIGGER $ 1.54 1.56 1.50

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