A U.S. based MNC, Whole Inc., will need 10 million Japanese Yen on January 1. It is now November 1. Whole has negotiated a non-deliverable forward contract with its bank. The reference rate is the yen closing exchange rate (in $) quoted by Bank of Japan in 60 days. The yens spot rate today is $ 0.0099. The rate quoted by Bank of Japan on January 1 is $ 0.017.

a). What is an NDF?

b) Explain how does the NDF help Whole to hedge its exposure to exchange rate risk.

c). What will be the transaction between Whole and its bank on January 1?