A risk manager analyzes a long position with a USD 10 million value. To hedge the portfolio, it seeks to use options that decrease JPY 0.50 in value for every JPY 1 increase in the long position. At first approximation, what is the overall exposure to USD depreciation?
- His overall portfolio has the same exposure to USD as a portfolio that is long USD 5 million.
- His overall portfolio has the same exposure to USD as a portfolio that is long USD 10 million.
- His overall portfolio has the same exposure to USD as a portfolio that is short USD 5 million.
- His overall portfolio has the same exposure to USD as a portfolio that is short USD 10 million.
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