Question
Currency mismatch but no maturity mismatch Assume there are no HC/EUR future contracts. In this case, you could try to hedge the FUR 360,000 with
Currency mismatch but no maturity mismatch
Assume there are no HC/EUR future contracts. In this case, you could try to hedge the FUR 360,000 with another currency. Your group has been assigned to a specific foreign currency (FC 1) that you can use as a hedge. Determine the optimal hedge ratio, and how you would implement your strategy to hedge the exposure of EUR 360,000.
(The exchange rate of HC/EUR and HC/FC1 are 0.908714 and 1.139763 respectively. The three months interest rate of HC, FCI and EUR are 2.5284154 ,2.288533 and -0.32787 respectively.)
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