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Subject: Agricultural Business Management × Author: Avneet Kaur × Type: Thesis × Thesis Type: Ph.D ×
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    ThesisItemOpen Access
    Evaluation Of Option Strategies In Different Scenarios And Identification Of Fundamental Determinants Of Exchange Rate Movement: A Study Of Indian Currency Market
    (Punjab Agricultural University, Ludhiana, 2018) Avneet Kaur; Kapur, Sandeep
    Empirical literature lacks in quantum of studies on option payoffs especially in context of Indian foreign exchange contracts. The present study was undertaken to study the option payoffs especially in context of Indian foreign exchange contracts. The study has tried to assess the bullish, bearish and neutral option payoffs with underlying USD-INR contract. The study was done for a period of 68 months from October 2010 to June 2016. Three bullish option strategies namely long call, short put and covered call were applied and their pay offs were assessed for different moneyness. Payoffs of three bearish option strategies namely long put, short call and bear call spread was also assessed. In addition, four neutral strategies namely long and short straddle; and long and short strangle were employed. Various combinations of options using ATM, ITM and OTM calls and puts were formed and analysed. The findings of the study show that under bullish option strategies 2%OTM covered call strategy performed better with least coefficient of variance. 2%OTM short call and ATMC ATMP long straddle performed better with least coefficient of variance in bearish and neutral option strategies respectively. No statistical significant differences were recorded when compared for different moneyness in the any respective strategy. The study also attempted to find various macroeconomic variables which affect the movement in USD-INR exchange rate. Monthly data related to 11 variables was taken for the time period starting from 1st May, 1998 to 30th June, 2015. It was found that the predictor variables such as ratio of export to import for India, foreign exchange reserve, 10-year bond yield of India has a positive impact on the USD-INR, whereas other predictors i.e. index of industrial production, foreign institutional investor flow, brent crude oil, S&P500 has a negative impact on the USD-INR.