Question
Empirical evidence indicates that the Forward market for foreign currencies is Efficient. You conduct business regularly with a company in Florence Italy and have been
Empirical evidence indicates that the Forward market for foreign currencies is Efficient. You conduct business regularly with a company in Florence Italy and have been inclined to hedge in the Forward market. A UCLA Intern has just brought in hedging data for last quarters Euro denominated receivables. You generally receive between 6-8 million Euros each month. Spot value Month F value on Month Spot value Month Beginning Beginning for Month End End Spot 7/1 = $1.12, F7/31 7/1 $1.18, Spot 7/31 = $1.19 Spot 8/1 = $1.19, F8/31 8/1 = $1.15, Spot 8/31 = $1.17 Spot 9/1 = $1.18, F9/1 9/1 = $1.20, Spot 9/30 = $1.22
1.) Make the case for continuing to employ the Forward market.
2.) Make the case for not hedging.
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