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Two months ago the Italian bank Unicredit signed a 3 months forward contract with Fiat promising to deliver USD 1 3 . 5 0 0
Two months ago the Italian bank Unicredit signed a months forward contract with Fiat promising to deliver USD against payment by Fiat of EUR Unicredit now has decided that it wants to use a swap to move its contractual obligations one month further into the future. Another European bank, Santander offers the following rates for USD EUR swaps one month forward: day day EURUSD
a What contract should Unicredit sign with Santander and what would the rates terms be of such a contract?
b Illustrate the flows between Santander, Unicredit and Fiat, using a diagram
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