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I would appreciate your help with these questions. True/False
1. The cost stemming from hedging against foreign exchange risk are lower when currency forwards instead of currency options are used for this purpose.
2. A call option to buy Singapore dollars at strike price of 10 South African rands is equal to a put option to sell 10 South African rands at strike price of 0.1 Singapore dollars, given that the options have the same maturity.
Actually, I'm not trolling. There are no other factors.
Howabout these? True or False?
1. A three-month futures price must always be higher than the current spot price of the underlying asset.
2. Based on the yield spreads, the corporate bond market seems to underestimate default probabilities, since the so-called risk-neutral default probabilities are generally much lower that the real world default probabilities.
3. Back-testing indicates how well Value-at-Risk (VaR) estimates have performed in the past(this is True). For example, if the back testing shows that 10-day 95% VaR has been exceeded in 25 days during the last two years, the VaR estimate can be considered relatively reliable.
