Question
JC bank in Japan has committed to deliver yen in 3 months to MT Ltd in the US, a corporate customer. The spot rate is
JC bank in Japan has committed to deliver yen in 3 months to MT Ltd in the US, a corporate customer. The spot rate is 118 yen to the dollar and the 3-month forward rate is 106 yen per dollar. In recent years, there is increasing trading dealing with foreign currency in JC bank.
-Are there costs to hedging this exposure with the forward market? Explain. (10 marks)
- Explain FIVE (5) reasons about the level of foreign currency trading has increased in JC bank? (15 marks)
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Building Financial Models
Authors: John Tjia
2nd Edition
0071608893, 978-0071608893
