Question
A US firm sold goods to a British firm at an agreed price of 2,812,500 GBP which it will receive in December. The choose to
A US firm sold goods to a British firm at an agreed price of 2,812,500 GBP which it will receive in December. The choose to manage this exposure using CME futures contracts:
-Contract: GBP / USD Futures
Expiry: December
Price: 1.6491
size: 62,500 GBP
maintenance margin: 1500USD
initial margin: 110% of maintenance margin
settlement: physical delivery
current spot value of the pound is 1.6524
a) how many futures contracts will they use to hedge their exposure and will they buy or sell said futures ?
b) what is the total size of the margin that would be required at the beginning to hedge this exposure ?
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Financial Reporting and Analysis
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon
6th edition
9780077632182, 78025672, 77632184, 978-0078025679
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