Question
A bank agrees to buy 1 million at 1 = $1.41 in one year, i.e., the bank buys 1 million with a forward contract. The
A bank agrees to buy £1 million at £1 = $1.41 in one year, i.e., the bank buys £1 million with a forward contract. The euro and dollar interest rates are 5% and 3% respectively.
(a) Calculate the delta of this position.
(b) How can the bank hedge this forward contract to make it delta neutral?
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The bank enters in a forward contract to buy 1 million in one year at a forward rate of 141 p...
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Global Investments
Authors: Bruno Solnik, Dennis McLeavey
6th edition
321527704, 978-0321527707
