Business, 01.07.2021 01:30, omar2334

(a) Keep the number of put options Megatron buys fixed at 250 million put options on EU and 175 million put options on BP. Megatron is considering the following 4 potential strike prices for EU: $1.20, $1.24, $1.28, and $1.32; and the following 4 potential strike prices for BP: $1.20, $1.30, $1.40 and $1.45. Evaluate all 16 options (on the criteria maximize the probability that the earnings are above $706 million) and select the best combination. Is the best combination better than not hedging (i. e. is Megatron better off not buying any put options)

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(a) Keep the number of put options Megatron buys fixed at 250 million put options on EU and 175 mill...