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8 IFM 2 0 2 3 - Aug forward hedging A US firm holds an asset in France and faces the following scenario: In the
IFM Aug forward hedging
A US firm holds an asset in France and faces the following scenario:
In the above table, is the euro price of the asset held by the firm and is the dollar price of
the asset.
a Compute round to decimals:
mean of spot exchange rate :
variance of spot exchange rate VAR :
standard deviation of spot exchange rateVARS :
b Compute round to decimal:
mean of dolar price of asset
variance of dolar price of asset Var
standard deviation of spot exchange rate VAR
covarience cov
c Compute the exchange exposure faced by the US firm.
Round your answer to integer
d What is the variance of equity position that is attributable to the exchange rate uncertainty?
Round your answer to integer
e If the US firm hedges against this exposure using the forward contract, what is the variance of
the dollar value of the hedged position?
Round your answer to integer
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