Business, 10.03.2020 16:32 AaronEarlMerringer
Your firm is a U. K.-based exporter of bicycles. You have sold an order to a Swiss firm for SFr. 1,000,000 worth of bicycles. Payment from the Swiss firm (in Swiss francs) is due in 12 months. Detail a strategy using futures contracts that will hedge your exchange rate risk. Have an estimate of how many contracts of what type and maturity.
U. S. $ equiv. Currency per U. S. $
Contract Size Country Tuesday Monday Tuesday Monday
£ 10,000 Britain (pound) $ 1.9600 $ 1.9400 £ 0.5102 £ 0.5155
1 month forward $ 1.9700 $ 1.9500 £ 0.5076 £ 0.5128
3 months forward $ 1.9800 $ 1.9600 £ 0.5051 £ 0.5102
6 months forward $ 1.9900 $ 1.9700 £ 0.5025 £ 0.5076
12 months forward $ 2.0000 $ 1.9800 £ 0.5000 £ 0.5051
€ 10,000 Euro $ 1.5600 $ 1.5400 € 0.6410 € 0.6494
1 month forward $ 1.5700 $ 1.5500 € 0.6369 € 0.6452
3 months forward $ 1.5800 $ 1.5600 € 0.6329 € 0.6410
6 months forward $ 1.5900 $ 1.5700 € 0.6289 € 0.6369
12 months forward $ 1.6000 $ 1.5800 € 0.6250 € 0.6329
SFr. 10,000 Swiss franc $ 0.9200 $ 0.9000 SFr. 1.0870 SFr. 1.1111
1 month forward $ 0.9400 $ 0.9200 SFr. 1.0638 SFr. 1.0870
3 months forward $ 0.9600 $ 0.9400 SFr. 1.0417 SFr. 1.0638
6 months forward $ 0.9800 $ 0.9600 SFr. 1.0204 SFr. 1.0417
12 months forward $ 1.0000 $ 0.9800 SFr. 1.0000 SFr. 1.0204
Go short 100 12-month Swiss franc futures contracts; and short 50 12-month pound futures contracts.
Go short 100 12-month Swiss franc futures contracts; and long 50 12-month pound futures contracts.
none of the options
Go long 100 12-month Swiss franc futures contracts; and long 50 12-month pound futures contracts.
Go long 100 12-month Swiss franc futures contracts; and short 50 12-month pound futures contracts.
Answers: 3
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Your firm is a U. K.-based exporter of bicycles. You have sold an order to a Swiss firm for SFr. 1,0...
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