FX Options and Structured Products by Wystup Uwe;

Author:Wystup, Uwe; [Wystup, Uwe]
Language: eng
Format: epub
Publisher: John Wiley & Sons, Incorporated
Published: 2017-07-24T00:00:00+00:00

How would you structure this product? And how much sales margin would it generate for a volatility of 10%, EUR interest rate of 3%, and USD interest rates such that the forward comes out correctly, if it is priced in the Black‐Scholes model?

Flip Forward Given a market situation of EUR‐USD spot 0.9000 and four‐months forward of 0.8960 and terms listed in Table 2.25.

TABLE 2.25 Terms and conditions of a flip forward

Currency pair EUR‐USD

Nominal USD 1,000,000.00

Maturity 4 months from now

Preliminary exchange rate 0.8850

Worst case 0.9050

Trigger 0.9200

Trigger type European – valid at maturity only

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