Assume the same identical values hold as in the case of Dayton in the chapter, with the single exception that the \(£ 1,000,000\) exposure is a 90 -day account payable, not account receivable.

a. Explain precisely how to construct a synthetic forward to coyer the exposure.

b. Diagram the construction.

c. Explain how you would construct a "synthetic forward" whose strike prices are set so that the firm would have a positive net premium to pay up front, but would enjoy a slightly better constructed forward rate.