California State Polytechnic University, Pomona



(X-M) + (CI-CO) +(FI-FO) + FXB = BOP

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i = r + ( + r(

i$ = r$ + ($ ; iFC = rFC + (FC

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Buyer of Call Option: Profit/Loss = Spot Rate – (Strike Price + Premium)

Writer of Call Option: Profit/Loss = Premium –(Spot Rate –Strike Price)

Buyer of Put Option: Profit/Loss = Strike Price – (Spot Rate + Premium)

Writer of Put Option: Profit/Loss = Premium – (Strike Price – Spot Rate)

RCHp = NCHp - NCp

RCHr = NRr - NRHr

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(Size of Option)*(Premium)*(Spot Rate) = (Cost of Option)

Net Exposed Assets = Exposed Assets – Exposed Liabilities

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FRL 453

Multinational Financial Management

Formula Sheet

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Note: Variable “S” represents direct quotation of exchange rate. The Textbook uses “e” instead of “S”, so “e” and “S” are interchangeable in the equations.

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