You hedged your company's exposure to the GBP appreciation against the USD by entering one unit of December GBPUSD foreign exchange futures contract (each GBPUSD futures contract with GBP 62,500) at the GBPUSD futures exchange rate of 1.1380 on September 25, with the GBPUSD spot exchange on that day at 1.1375. On October 5, you discovered that the December GBPUSD futures were quoted at 1.1330, and the spot rate for GBPUSD on that day was 1.1318. It is now October 6; you observe that the December GBPUSD futures are quoted at 1.1285, and the spot rate for GBPUSD is 1.1274.

If you hedge the same exposure as above by a forward contract but not the futures contract, answer the following questions.

a) What is your hedging position (to buy or to sell) using the GBPUSD forwards?

b) Who may be your counterparty?

c) What is this forward position's total cumulative profit or loss as of October 5?

d) What is the total cumulative profit or loss on this forward position as of October 6?

e) Does anything happen on October 6? Why?