financial derivatives, please show all work

12. A long-lost relative of yours died, and as part of the trust, you must invest 100 million Swedish kronor (SEK) in 3-months. You wish to hedge changes in the US dollar (USD)-SEK exchange rate using forward contracts on either the euro (EUR) or the Swiss franc (CHF). You estimate the following: - EUR forwards: The standard deviation of quarterly changes in the USD/SEK spot exchange rate is 0.007, the standard deviation of quarterly changes in the USD/EUR forward rate is 0.018, and the correlation between the changes is 0.90. 3 - CHF forwards: The standard deviation of quarterly changes in the USD/SEK spot exchange rate is 0.007, the standard deviation of quarterly changes in the USD/CHF forward rate is 0.023, and the correlation between the changes is 0.85. Finally, the current USD/SEK spot rate is 0.104, the current 3-month USD/EUR forward rate is 1.071, and the current 3-month USD/CHF forward rate is 0.602. a. Which currency should you use for hedging? b. What is the minimum-variance hedge position? Indicate if this is to be long or short. 13. You manage a portfolio of bonds and run a regression of your bond's price changes on the changes in the S\&P 500 index futures and changes in the ten-year Treasury note futures. The regression result is as follows: P=0.030.3S&P+0.7TRY,R2=0.8 where the regression above is in changes in index values for all the right-hand side variables. What positions in the two (2) index futures will you take? What proportion of the risk remains unhedged? What implicit assumption might you be making in this case? 12. A long-lost relative of yours died, and as part of the trust, you must invest 100 million Swedish kronor (SEK) in 3-months. You wish to hedge changes in the US dollar (USD)-SEK exchange rate using forward contracts on either the euro (EUR) or the Swiss franc (CHF). You estimate the following: - EUR forwards: The standard deviation of quarterly changes in the USD/SEK spot exchange rate is 0.007, the standard deviation of quarterly changes in the USD/EUR forward rate is 0.018, and the correlation between the changes is 0.90. 3 - CHF forwards: The standard deviation of quarterly changes in the USD/SEK spot exchange rate is 0.007, the standard deviation of quarterly changes in the USD/CHF forward rate is 0.023, and the correlation between the changes is 0.85. Finally, the current USD/SEK spot rate is 0.104, the current 3-month USD/EUR forward rate is 1.071, and the current 3-month USD/CHF forward rate is 0.602. a. Which currency should you use for hedging? b. What is the minimum-variance hedge position? Indicate if this is to be long or short. 13. You manage a portfolio of bonds and run a regression of your bond's price changes on the changes in the S\&P 500 index futures and changes in the ten-year Treasury note futures. The regression result is as follows: P=0.030.3S&P+0.7TRY,R2=0.8 where the regression above is in changes in index values for all the right-hand side variables. What positions in the two (2) index futures will you take? What proportion of the risk remains unhedged? What implicit assumption might you be making in this case