Question
What is the Forward Hedge? Todays date: 14 February Repatriation of EUR 3.5 million on 18 September The company has an agreement to buy 300,000
What is the Forward Hedge?
Today’s date: 14 February
Repatriation of EUR 3.5 million on 18 September
The company has an agreement to buy 300,000 computer chips at Yen9000 each on a semi-annual basis, with payment due on 15th June. Calculate results for forward hedge. Interest rates are annualised, the actual number of days in the hedging period need to be considered (no of days/360).
| Spot rates | |||
| USD | EUR | JPY | |
| JPY | 78.064 | ||
| EUR | 0.77408 | ||
| USD | 1.2919 | 0.01281 | |
| 4-Month forward rates | |||
| USD | JPY | ||
| JPY | 78.482 | ||
| USD | 0.01274 | ||
| 7-Month forward rates | |||
| EUR | 0.77394 | ||
| USD | 1.2921 |
Step by Step Solution
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A forward hedge is a risk management strategy that involves entering into a forward contract to lock in a future exchange rate for a transaction in a ...
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Fundamentals of Futures and Options Markets
Authors: John C. Hull
8th edition
978-1292155036, 1292155035, 132993341, 978-0132993340
