Question
A U.S. company is interested in using a futures contract maturing at time T to hedge a foreign currency exposure at time t. Define
A U.S. company is interested in using a futures contract maturing at time T to hedge a foreign currency exposure at time t. Define r as the interest rate (all maturities) on the U.S. dollar and rf as the interest rate (all maturities) on the foreign currency. Assume that r and rf are constant. (Hull Ch3) (a) Show that the optimal hedge ratio is e(rs-r)(T-ti).
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Options Futures and Other Derivatives
Authors: John C. Hull
10th edition
013447208X, 978-0134472089
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