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Former Member
Jan 18, 2011 at 10:13 AM

Currency Options

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Hi Gurus

I need to configure a Currency Option Case Study. Please suggest the product type to be used and how to achieve the scenario through SAP Treasury & Risk Manegement.

Example:

"ABC Ltd buys USD put INR call at 47.40 for USD 1 Million

ABC Ltd sells USD call INR put at 48.25 for USD 1.5 Million.

Payoff:

1. If spot on expiry is below 47.50, ABC Ltd has a right to sell USD 1 Million at 47.40

2. If spot on expiry is between 47.40 and 48.25, ABC ltd sells USD 1.5 Million at spot

3. If spot on expiry is above 48.25, ABC ltd is obliged to sell USD 1.5 Million at 48.25.

Risks:

1. If spot is below 47.40 on expiry, ABC ltd, is only hedged for USD 1 million at 47.4, the remaining USD 0.5 million is unhedged.

2. If spot is above 48.25 on expiry, ABC ltd is obliged to sell USD at 1.5 million at 48.25 which is lower than the prevailing spot rate.

Spot rate 45.08 and Forward Ref for 30th Nov, 2011 - 47.40

Expiry - 28 Nov, 2011

Delivery - 30 Nov, 2011"

Please note in this particular case one option is bought and simultaneously other is sold. Which is the product type to be used and what should be the exact config details.,

Thanks and please help

Shaurya