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Posted on Aug 11, 2024

You have to make a 90,000,000 payment in Japanese Yen on close of business day, Friday, January 18th. You decide to hedge your risk with

You have to make a 90,000,000 payment in Japanese Yen on close of business day, Friday, January 18th. You decide to hedge your risk with the futures contracts. Assume you that you enter into the futures position at a close of day on Tuesday, January 15th. Futures and spot data are provided BELOW. Contract size is 12,500,000 yen.
1. Describe the position you decide to enter (long or short).
1. Describe the contract (what month, and what quantity).
1. Document the gain or loss due to marking to market every day that your position is open.
1. What is the total cost in US$ after you have closed out your futures positions, and made your payment?
1. What would have been the total cost in US$, if you had not hedged? Did you benefit from hedging?
1. Repeat steps a) e) assuming that you expect to receive a payment of 900,000 British pounds on close of business day, Friday, January 18th. Assume you that you enter into the futures position at a close of day on Tuesday, January 15th. Contract size is 62,500 British pounds.

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Japanese Yen Data Daily Settlements for Japanese Yen Future (FINAL Trade Date: Wednesday, 01/16/2019 Estimated Prior Day Month Open HighLowLast Change |Settle FEB 19 92455 92500 91850 91850 -290 92060 525 MAR 19 92480 92730 92025 92115B-29092265 | 103,346 APR 19 92760 92860B 92340A 92340A -290 92500 1,745 MAY 19 JUN 19 93300 193345B 92750 92750295 192970 SEP 19 Volume lOpen Interest 787 225,891 1,451 28 901 110 93080B 92560A 92560A -290 92710 0 36 300 93690 Daily Settlements for Japanese Yen Futures (FINAL Trade Date: Fridav, 01/18/2019 EstimatedPrior Day Month [Open HighLowLast Change |Settle FEB 19 91730 91820B 91240 91320B-44591300 MAR 19 91980 92115 9140591500-44591500 111,197 APR 19 |91930 92240B 91720A 91740B-445 91730 MAY 19 JUN 19 192595 92700B 92190A 92225-45092200 SEP 19 Volume Open Interest 403 675 217,141 563 148 1,012 110 358 92460B 91940A 91960B450 [91940 169 -440 92920 Spot data: YYYY/MM/DD|wdyl USD/JPY 2458499 2019/01/15 Tue o.0092115 2458500 2019/01/16 Wedo.0091863 2458501 2019/01/17Thu 0.0091771 2458502 2019/01/18 Frio.0091176 British Pound Data Daily Settlements for British Pound Future (FINAL Trade Date: Wednesday, 01/16/2019 st Change Settle Estimated Prior Day | VolumeInterest Month OpenHigh LowL Open FEB 191.28851.29141.2862A1.2899+.00391.28941,813 MAR 191.29001.29381.28651.2916+.0039 1.2911|126,336 APR 19 MAY 191.2931 1.2937B.293.2931+.0039 1.2947 238 JUN 19 1.2952 1.2989B1.2929A1.29820039 1.2969 SEP 191.30051.30341.3005 1.3013+.0038 1.3023 829 216,387 392 C) 1,271 347 1.2920B 1.2920B.00401.2930 51 7 Daily Settlements for British Pound Futures (FINAL)Trade Date: Friday, 01/18/2019 hange Settle Estimated Prior Day Open Month OpenHighL FEB 19 1.3005 30051.28861.2886.01171.28911,287 MAR 19| 1.3025| 1.3031 1.2893 1.2912 -.0117 1.2909| 96,105 APR 19 1.3043 1.3043 1.3037 1.3037 -.01 17 1.2928 748 MAY 19 JUN 191.3076 1.3084B1.2962 1.2962.0117 1.2967 SEP 191.301 | 1.30111.3011 1.3011.0117 1.3023 1,521 210,969 390 131 1,280 349 1.3060A 1.3060A0171.29451,123 50 Spot Data: uudePay|YYYY/MM/DDwdy!USD/GBP 2458499 2019/01/15 Tue 1.2791 2458500 2019/01/16 Wed1.2867 2458501 2019/01/17 Thu1.2943 2458502 2019/01/18 Fri1.2897