On 1/1/2012 the Tunisian company SOPEX, subsidiary of a foreign multinational group, established the state of its receivables and payables in foreign currency with other group companies: Receivables Payables Amount Maturity Amount Maturity 25 000 EUR 03/31/2012 8 000 CHF 02/29/2012 50 000 $ 06/30/2012 12 000 EUR 03/31/2012 80 000 CAD 09/30/2012 24 000 USD 04/30/2012 15 000 CHF 12/31/2012 12 000 CAD 06/30/2012

At the same time the bank discloses the following spot exchange rates, interest rates and exercise price of the following options: Spot Exchange Rates: Currency Spot 1 Forward rate Forward rate (Payabes) (X) X/TND (Receivables) X/TND X/TND $ 1.2 1.8409 1.1490

CAD 1.62 1.2088 1.8409 CHF 1.15 1.6084 1.2059 EUR 1.85 1.1446 1.6121 TND* 1.00

*TND is the Tunisian currency

Strike prices of Options: Option Put Option Call Currency Maturity Currency Maturity EUR = 1.8 03/31/2012 CHF = 1.1 02/29/2012 $ = 1.25 06/30/2012 EUR = 1.8 03/31/2012 CAD = 1.58 09/30/2012 $ = 1.275 04/30/2012 CHF = 1.2 12/31/2012 CAD = 1.65 06/30/2012 The buyer of an option should pay a 1% premium of the relative receivables or payables. The premium is not refundable even if the option is not exercised. To hedge against the currency risks the CFO of the company hesitates between futures contract coverage and option coverage. 1. Determine the various forward rates to hedge against the currency risk of the company 2. Compare the results of the following three strategies: - Hedging with forward contracts - Hedging with options - No hedge Knowing that the spot exchange rates at maturity are: Currency Maturity Currency Maturity EUR = 1.84 03/31/2012 CHF = 1 02/29/2012 $ = 1.2 06/30/2012 EUR = 1.9 03/31/2012 CAD = 1.62 09/30/2012 $ = 1.2 04/30/2012 CHF = 1.2 12/31/2012 CAD = 1.67 06/30/2012