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1. In March, a U.S. Company is expecting to have to pay 1,250,000 Euros in May to its European customers, and wants to hedge against
1. In March, a U.S. Company is expecting to have to pay 1,250,000 Euros in May to its European customers, and wants to hedge against a rise in the value of the Euro relative to the U.S. dollar in June. At this time the spot exchange rate Euro is $1.2280 USD. The CME Group future settle rate for a May Euro FX futures contacts is 1 Euro $1.2350 USD, with each futures contract for 125,000 Euros per contract. Suppose in May the spot rate for the Euro changes to S1.2758 USD and the Euro futures FX price changes to $1.2828SD Calculate the spot opportunity loss or gain for the company and the futures gain or loss. What is the net hedging result? b. Spot Gain or Loss Futures Gain or Loss Net Hedging Result (Futures Gain or Loss- Spot Gain or Loss)
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