1. You have to make a 90,000,000 payment in Japanese Yen on close of business day, Friday, January 17th. 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 14th. Futures and spot data are provided in the file HW1_data.doc. Contract size is 12,500,000 yen.

1. Describe the position you decide to enter (long or short).

2. Describe the contract (what month, and what quantity).

3. Document the gain or loss due to marking to market every day that your position is open.

4. What is the total cost in US$ after you have closed out your futures positions, and made your payment?

5. What would have been the total cost in US$, if you had not hedged? Did you benefit from hedging?

Japanese Yen Data

Daily Settlements for Japanese Yen Future (FINAL)Trade Date: Wednesday, 01/15/2020

Month	Open	High	Low	Last	Change	Settle	Estimated Volume	Prior Day Open Interest
FEB 20	91150	91235B	91065A	91145A	+50	91130	54	804
MAR 20	91210	91380	91195	91280	+50	91265	93,669	181,364
APR 20	91450	91490B	91450	91450	+50	91420	2	803
MAY 20	-	91665B	-	91610B	+50	91595	0	0
JUN 20	91770	91820B	91675A	91745A	+55	91735	6	883
SEP 20	-	92205B	-	92205B	+55	92190	0	5

Daily Settlements for Japanese Yen Futures (FINAL)Trade Date: Friday, 01/17/2020

Month	Open	High	Low	Last	Change	Settle	Estimated Volume	Prior Day Open Interest
FEB 20	90810	91000B	90810	90920A	-10	90925	56	794
MAR 20	91045	91140	90935	91060	-10	91060	87,462	193,495
APR 20	-	91255B	91135A	91210A	-5	91215	0	803
MAY 20	-	91425B	91310A	91385A	-15	91385	0	0
JUN 20	91500	91600	91410	91530B	-10	91525	49	916
SEP 20	-	-	91940A	91965B	-10	91980	0	5

Spot data:

Jul.Day	YYYY/MM/DD	Wdy	USD/JPY
2458863	2020/01/14	Tue	0.0090874
2458864	2020/01/15	Wed	0.0090958
2458865	2020/01/16	Thu	0.0090839
2458866	2020/01/17	Fri	0.0090798