It is 1 June 2015, and Nhyira-Boateng Corp. is anticipating receipt of EUR580,000 in two months time from a French customer. The spot EURUSD exchange rate is currently USD1.2110 USD1.2260 = EUR1. The corporation fears that the euro might weaken against the dollar and so plans to hedge against the currency. The directors of the corporation are considering a forward hedge, option hedge, and futures hedge. Below are specifications and quotations for the various contracts.

Forward market:

2-month forward bid rate on 1 June 2015: USD1.2340 = EUR1

2-month forward ask rate on 1 June 2015: USD1.2490 = EUR1

Options market:

Options on euro with standard contract size EUR125,000 available on 1 June 2015:

Strike price	Premiums (cents per pound)
	Jun 2015 Calls	Sep 2015 Calls	Jun 2015 Puts	Sep 2015 Puts
12000	1.05	1.75	0.40	0.50
12400	0.85	1.15	0.61	0.92
12800	0.45	0.87	1.60	1.89

Futures market:

Euro futures with standard contract size EUR125,000 available on 1 June 2015:

Maturity Futures price

Jun 2015 USD1.2380

Sep 2015 USD1.2580

Required:

Suppose the company hedges with the forward contract, evaluate the outcome of the hedge.

Suppose the company hedges with a futures contract. Evaluate the outcome of the hedge if the spot exchange rate closes at USD1.2480 USD1.2630 = EUR1 and the futures price closes at USD1.2750 in two months time.

Suppose the company hedges with option contract. Evaluate the outcome of the hedge if the spot exchange rate closes at USD1.2480 USD1.2630 = EUR1.