Mangonel Capital, a private equity firm in the U.S., has invested in several companies in Sweden. The firm will receive 50,000,000 Swedish Kronor (SEK, the Swedish currency) in 1 year and will convert this cash flow to U.S. dollars (USD) then. However, the managing director is worried about a possible appreciation of USD against SEK. As a senior analyst, you are assigned the job to manage the currency risk.

1. (a) (2 pts) You immediately find that the CME Group has SEK-USD futures contracts. However, your manager suggests using either EUR-USD futures or CHF-USD futures.2 Why? (Hint: Check the market data on their official websites.)