Question

Spot rate for EUR/USD is 1.08 and it trades at a premium of 1.5%. Calculate the EUR/USD forward rate.

Question

Siemens Germany exported machinery to USA government and will be paid US$5m on 31 March 2024. The company wants to hedge this exposure as its operations is in Euro. The following information is available to you:

EUR / US$ forward rate for 31/3/2024 1.0810 / 1.0850

Euro call options strike price expiry 31/3/24 1.0750 premium 0.002

Euro put option strike price expiry 31/3/24 1.0720 premium 0.002

What is the best hedging method that Siemens should use?

What will be the Euro equivalent of this hedge?