ASSUME THAT YOU ARE  A MULTINATIONAL AND EXPECT TO RECEIVE $10,000000 IN EUROS ON APRIL 15.

A) WHAT DO YOU EXPECT THE EURO TO BE RELATIVE TO THE USD DURING THIS PERIOD (UP, DOWN, STABLE).

B) DO YOU NEED TO HEDGE YOUR CF RECEIVABLES?

C) WHAT IS THE FUTURES PRICE FOR THAT PERIOD?

 

1.WHAT IS THE FORWARD PRICE?

2.WHAT IS THE OPTIONS PRICE?

3.WHAT SHOULD BE THER THEORETICAL PRICE BASED ON WHAT WE STUDIED FOR FORWARDS, FUTURES AND OPTIONS?

4.WHAT IS THE BEST WAY TO HEDGE THE CASHFLOWS?

 

USE THE YIELD ON THE TEN YEAR BONDS ISSUED BY GERMANY.  WE ARE USING THE SAFEST BONDS IN EUROPE AS THE PROXY FOR THE RISK FREE RATE.

 

FOR THE US ALSO WE CAN USE THE YIELD ON THE 10 YEAR BONDS.

    • 9 years ago
    Hedging project
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