Question
Assume the following information: 1-year U.S. interest rate 4% 1-year Israeli interest rate 3% 1-year forward rate of Israeli New Shekel (ILS) $.400 Spot rate
Assume the following information:
| 1-year U.S. interest rate | 4% |
| 1-year Israeli interest rate | 3% |
| 1-year forward rate of Israeli New Shekel (ILS) | $.400 |
| Spot rate of Israeli New Shekel (ILS) | $.404 |
Assume that the Bornfree Inc. in the United States will need 300,000 Israeli New Shekel (ILS) in 1 year. It wants to hedge this payables position.
Would it be better off using a forward hedge or a money market hedge?
Substantiate your answer with estimated costs for each type of hedge.
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Quantitative Finance With R And Cryptocurrencies
Authors: Dean Fantazzini
1st Edition
1090685319, 9781090685315
