B.2.4 Example 4

On 01-Jun-2003, National Bank buys a call option on 10,000 USD against the INR with a strike price of 50 INR with 31-Dec-2003 as the maturity date. National Bank pays a premium of 100 USD for the option.

Parameters of the deal:

Table B-59 Example 4

Contract Type	Value
Contract Amount	10000
Contract Currency	USD
Counter Currency	INR
Option premium	100 USD
Current Spot Rate	48 INR/USD
Option Style	No Touch
Fixed Amt to be paid	500
Fixed Amount Currency	EUR
Barrier	49 INR/USD
Lower Barrier	46 INR/USD
Rebate	50 AUD
Barrier Window Start Date	01-Sep-2003
Barrier Window End Date	01-Nov-2003

Here, if at any time during 01-Sep-2003 and 01-Nov-2003, the spot rate touches or goes below 46 INR/USD or touches or goes above 49 INR/USD, the option is knocked out and a rebate of 50 AUD is paid by the seller of the option to National Bank, either on the knock out date or on maturity (31-Dec-2003). If the spot rate does not touch either barrier during the barrier window, a fixed amount of 500 EUR is paid by the seller of the option to National Bank on the maturity date.