govinda (student)     07 March 2017

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Nov-15 Sfm Question Q1(d) as per question XYZ, need to pay Japnese Yen 500000. But in solution part put option has been taken incase of Forex Currency Option on purchase? But as per my knowledge Put Option is for sale. Xyz need to buy YEN from Bank IN ORDER to Pay. Why Put option is selected??? I think it should be Call Option. Please Clarify this..

Saurabh S (CA Final)     09 March 2017

Saurabh S
CA Final 
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Understand that we have been given Options on Home Currency i.e. Yen/INR (and not Yen)


So, we are afraid of Yen rising i.e. INR falling

Therefore, we buy a Put in the home currency(INR), which is same as Call option in Yen, but the same is not provided in the Q


PS: Dont post same Q repetitvely, it leads to unnecessary clutter, have patience, someone will eventually reply.

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govinda (student)     17 March 2017

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Thanks a lot now i got the concept

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