1.You have to make a 90,000,000 payment in Japanese Yen on close of business day, Friday, January 20th. You decide to hedge your risk with the futures contracts. Assume you that you enter into the futures position at a close of day on Tuesday, January 17th. Futures and spot data are provided in the file HW1_data.doc. Contract size is 12,500,000 yen.

a.Describe the position you decide to enter (long or short).

b.Describe the contract (what month, and what quantity).

c.Document the gain or loss due to marking to market every day that your position is open.

d.What is the total cost in US$ after you have closed out your futures positions, and made your payment?

e.What would have been the total cost in US$, if you had not hedged? Did you benefit from hedging?

f.Repeat steps a) e) assuming that you expect a payment of 900,000 British pounds on close of business day, Friday, January 20th. Assume you that you enter into the futures position at a close of day on Tuesday, January 17th. Futures and spot data are provided in the file HW1_data.doc. Contract size is 62,500 British pounds.

Japanese Yen Data

Daily Settlements for Japanese Yen Future (FINAL)Trade Date: Wednesday, 01/18/2017

Month	Open	High	Low	Last	Change	Settle	Estimated Volume	Prior Day Open Interest
MAR 17	88835	88935	87285	87360	-740	88175	147,488	203,079
JUN 17	89250	89385B	87745A	87820B	-745	88625	383	8,556
SEP 17	89455	89535B	88285A	88285A	-760	89110	11	57
DEC 17	-	-	88925A	88925A	-755	89605	0	15
MAR 18	-	-	89500A	89500A	-740	90150	0	34
JUN 18	-	-	90110A	90110A	-760	90740	0	11

Daily Settlements for Japanese Yen Futures (FINAL)Trade Date: Friday, 01/20/2017

Month	Open	High	Low	Last	Change	Settle	Estimated Volume	Prior Day Open Interest
MAR 17	87080	87695	86800	87400	+390	87650	195,951	194,478
JUN 17	87570	88125B	87255A	87830A	+390	88095	319	8,477
SEP 17	-	88555B	87815A	88370A	+380	88575	0	59
DEC 17	88860	89000B	88395A	88860	+375	89070	1	16
MAR 18	-	89455B	88965A	89455B	+390	89625	0	34
JUN 18	-	-	89630A	89840B	+360	90210	0	11

Spot data:

Jul.Day	YYYY/MM/DD	Wdy	USD/JPY
2457771	2017/01/17	Tue	0.0088515
2457772	2017/01/18	Wed	0.0088184
2457773	2017/01/19	Thu	0.0086728
2457774	2017/01/20	Fri	0.0086888

British Pound Data

Daily Settlements for British Pound Future (FINAL)Trade Date: Wednesday, 01/18/2017

Month	Open	High	Low	Last	Change	Settle	Estimated Volume	Prior Day Open Interest
MAR 17	1.2419	1.2425	1.2268	1.2278	-.0110	1.2301	127,644	227,440
JUN 17	1.2452	1.2454B	1.2301A	1.2305B	-.0110	1.2333	290	1,031
SEP 17	1.2376	1.2421B	1.2327	1.2327	-.0109	1.2367	2	175
DEC 17	-	-	1.2381A	1.2381A	-.0110	1.2401	0	129
MAR 18	-	-	1.2426A	1.2426A	-.0109	1.2446	0	4
JUN 18	-	-	1.2478A	1.2478A	-.0108	1.2488	0	3

Daily Settlements for British Pound Futures (FINAL)Trade Date: Friday, 01/20/2017

Month	Open	High	Low	Last	Change	Settle	Estimated Volume	Prior Day Open Interest
MAR 17	1.2349	1.2394	1.2273	1.2390	+.0043	1.2392	98,611	223,605
JUN 17	1.2398	1.2424B	1.2308	1.2422	+.0043	1.2425	129	1,348
SEP 17	1.2395	1.2455B	1.2347A	1.2442B	+.0044	1.2460	1	175
DEC 17	-	1.2487B	1.2395A	1.2475A	+.0043	1.2494	0	129
MAR 18	-	1.2521B	1.2439A	1.2518A	+.0040	1.2538	0	4
JUN 18	-	1.2551B	1.2491A	1.2551B	+.0038	1.2579	0	3

Spot Data:

Jul.Day	YYYY/MM/DD	Wdy	USD/GBP
2457771	2017/01/17	Tue	1.2384
2457772	2017/01/18	Wed	1.2309
2457773	2017/01/19	Thu	1.2318
2457774	2017/01/20	Fri	1.2328