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You decide to spend a year studying in France, starting a year from now. You currently live in the U.S. and your assets are in
You decide to spend a year studying in France, starting a year from now. You currently live in the U.S. and your assets are in dollars. You have to pay for all your expenses in euros.These expenses total 20,000 euros and have to be paid at the start of your studies one year from now. What exchange rate risk do you face? How would you hedge with futures assuming that the futures are priced in $U.S. per euro? How would you hedge with options assuming the exercise price is also in $U.S. per euro? Explain your reasoning.
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