Question
In early March, a U.S. Company is expecting to receive 1,250,000 Euros in June from its European customers, and wants to hedge against a fall
In early March, a U.S. Company is expecting to receive 1,250,000 Euros in June from its European customers, and wants to hedge against a fall in the value of the Euro relative to the U.S. dollar in June.
At this time the spot exchange rate Euro was $1.139 USD. The CME Group future settle rate for June Euro FX futures contacts was 1 Euro = $1.119 USD, with each futures contract for 125,000 Euros per contract.
Suppose in June the spot rate for the Euro changes to $1.339 USD and the futures settle rate changes to $1.319 USD. Calculate the spot opportunity loss or gain for the company and the futures gain or loss. What is the net hedging result?
Spot Gain or Loss ________ Futures Gain or Loss ________
Net Hedging Result ___________ (Futures Gain or Loss Spot Gain or Loss)
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