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4) The Big Swiss Bank of Money has a guaranteed payment of US$500 million to receive from the US Government in 3 months' time but

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4) The Big Swiss Bank of Money has a guaranteed payment of US$500 million to receive from the US Government in 3 months' time but they are uncomfortable with the risk that the US Dollar may devalue against the Swiss Franc so they want to do some action to hedge this risk. Remembering that in the FX convention, the first three letters represent the currency you are long and the last three letters represent the currency you are short, what is the risk they want to hedge and what do they have to do to hedge it? a) They want to hedge operational risk and they have to go short a 3-month forward contract on USDCHF b) They want to hedge market risk and they have to go long a 3-month forward contract on USDCHF c) They want to hedge market risk and they have to go short a 3-month forward contract on USDCHF d) They want to hedge credit risk and they have to go long a 3-month forward contract on USDCHF

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