solution to zapa
solution to zapa case 1. Should Stephanie Mayo sell the put option protection already in place? In August 1992, Stephanie Mayo hedged DM 7.6mil to be received in November 1992. In this case the worst scenario is US$ appreciation. So that is why she hedged with covered put option. Stephanie does not expect to exercise the put. The put is only for safety net, just in case. If she expected the dollar to appreciate, a forward hedge would have been more appropriate. In September, foreign exchange volatility has increased and Stephanie was thinking what to do: ¥°. Sell the put at a profit - lock in a forward hedge, - do nothing.