Fin 440 Exam 2 Simple

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Last updated 9:51 PM on 10/12/26
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55 Terms

1
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Call Option

Right to BUY currency.

2
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Put Option

Right to SELL currency.

3
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Bullish

Expect currency to go UP (appreciate).

4
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Bearish

Expect currency to go DOWN (depreciate).

5
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Buy Call

Bullish strategy.

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Buy Put

Bearish strategy.

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Sell Call

Bearish strategy.

8
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Sell Put

Bullish strategy.

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Expected Appreciation

Buy Call.

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Expected Appreciation

Buy Futures.

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Expected Appreciation

Sell Put.

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Expected Depreciation

Buy Put.

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Expected Depreciation

Sell Futures.

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Expected Depreciation

Sell Call.

15
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Foreign Currency Payable

Need to PAY foreign currency in the future.

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Foreign Currency Receivable

Will RECEIVE foreign currency in the future.

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Payable Hedge

Buy Call.

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Payable Hedge

Buy Futures.

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Payable Hedge

Buy Forward.

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Receivable Hedge

Buy Put.

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Receivable Hedge

Sell Futures.

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Receivable Hedge

Sell Forward.

23
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Fear with Payable

Currency appreciates.

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Fear with Receivable

Currency depreciates.

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Call In-The-Money

S > X

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Put In-The-Money

S < X

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Call Break-Even

X + C

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Put Break-Even

X - P

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Call Profit

S - X - C

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Put Profit

X - S - P

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Forward Premium Formula

P=(F-S)/S

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Premium

F > S

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Discount

F < S

34
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Forward Contract

Customized contract.

35
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Futures Contract

Standardized contract.

36
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Forward

OTC and tailor-made.

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Futures

Exchange traded and standardized.

38
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Option Buyer

Has the RIGHT.

39
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Option Writer

Has the OBLIGATION.

40
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Forwards and Futures

Obligation to perform.

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Options

Right but not obligation.

42
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Long Straddle

Buy Call + Buy Put.

43
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Long Straddle Expectation

Big move either direction.

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Long Straddle Maximum Loss

Call premium + Put premium.

45
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Bull Spread

Moderate appreciation expected.

46
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Butterfly Spread

Very small movement expected.

47
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Call Premium Increases When

Spot rate increases.

48
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Call Premium Increases When

Volatility increases.

49
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Call Premium Increases When

Time to expiration increases.

50
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Call Premium Decreases When

Strike price increases.

51
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Put Premium Increases When

Strike price increases.

52
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Put Premium Increases When

Volatility increases.

53
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Put Premium Increases When

Time to expiration increases.

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Put Premium Decreases When

Spot rate increases.

55
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