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Part 1a.

A client is looking to buy forward CHF $60 million with USD on January 7, 2021. Calculate the USD/CHF forward rate given the following data.

Dates		Day Count
Transaction Date	June 5, 2020	N/A
Spot Value Date	June 7, 2020	N/A
Forward Value Date	January 7, 2021	214
6 Months Forward	December 6, 2020	182
12 Months Forward	June 7, 2021	365

	Rates
USD/CHF Spot	0.9837-47
6-Month Forward Points	78.00-88.00
12-Month Forward Points	132.10-148.10

0.9924

0.9936

0.9927

0.9919

Part 1b.

A client is looking to buy forward CHF $60 million with USD on January 7, 2021. Calculate the USD/CHF forward rate given the following data.

Dates		Day Count
Transaction Date	June 5, 2020	N/A
Spot Value Date	June 7, 2020	N/A
Forward Value Date	January 7, 2021	214
6 Months Forward	December 6, 2020	182
12 Months Forward	June 7, 2021	365

	Rates
USD/CHF Spot	0.9837-47
6-Month Forward Points	78.00-88.00
12-Month Forward Points	132.10-148.10

0.9924

0.9936

0.9927

0.9919

Part 1c.

A European client that was due to paying JPY 20 million held a forward contract to hedge a JPY 20 million contract, which has been delayed by one year. The client decided to enter into an FX swap to roll forward the position.

The EUR/JPY rate on the original FX forward expiry date was 119.30. The forward rate in one year is 119.10. The interest rate in Europe is 0.50% while the interest rate in Japan is 0.25%. Calculate the total benefit or cost of this FX swap.

- 138.30

- 137.59

138.30

137.59

Part 1d.

An FX swap involving interest payments at different floating rates is called:

Cross-currency basis swap

Cross-currency interest rate swap

Cross-currency

Cross-currency floating swap

Part 2a.

Which of the following statement about carry trades is NOT true?

Review Later

When the funding currency strengthens versus the carry currency, the investors realize profits from the carry trade.

Carry trades involve currency pairs that have a large interest rate differential.

Investors can benefit from a carry trade by borrowing in currency with lower interest rates, converting this amount into another currency with higher rates of return and investing.

The lower yielding currency in a carry trade is called the funding currency while the higher yielding currency is the carry currency.

Part 2b.

If one is long a European put option, when the spot price of the underlying asset is below than the strike price of the underlying asset the option is said to be:

At-the-money

In-the-money

Out-of-the-money

Below-the-money

Part 2c.

Investor A is currently in a short call position with a strike price of $36. The option premium for the option is $2.5. At expiration, the underlying asset price rises to $41. What is the investors net profit or loss?

$2.5

- $5

$0

- $2.5

Part 2d.

All the following FX products would be appropriate for hedging a transaction when the required future cash flows are certain EXCEPT:

Cross-currency FX swaps

FX options

FX swaps

FX forwards

Part 3a.

Client C based in Europe entered into a put option contract to hedge a contract of USD $2.15MM due in six months. Suppose six months later, EUR/USD drops to 1.0680. Using the provided information, determine whether the party should exercise the option and calculate the total cost.

EUR/USD spot rate today	1.0750
Cost of EUR/USD FX option contract	50,000
6-Month OTM put option (strike @ 1.0700)	0.0080

Do not exercise the option; total cost = 2,029,109

Exercise the option; total cost = 2,009,346

Exercise the option; total cost = 2,025,346

Do not exercise the option; total cost = 2,013,109

Part 3b.

Match the descriptions to the appropriate terminology for non-deliverable forwards (NDFs).

Notional Amount

Fixing Date

Settle Date

Contracted NDF Rate

1. Face value of the NDF in the non-deliverable currency
2. The forward FX rate agreed upon the transaction date
3. The date where the NDF rate will be compared with the spot rate
4. The date when the difference between the spot rate and NDF rate is paid out in cash

Part 4.

Which of the following currencies is not included in the basket of currencies which the value of the special drawing rights (SDRs) is based on?

CNY

JPY

EUR

CHF