Your firm has payables oustanding from an English supplier of 30 million due in 90 days. (Assume a 30/360 daycount.) There are options and a futures contract available in GBP. Details are in the tables below. Options are in 5 million increments and one futures contract is a commitment to 10 million. The current exchange rate (i.e., the spot rate) for GBP in USD is $1.20/1.00. A second table provides the distribution of expected spot exchange rates. Given the distribution, should you hedge? If so, what is the most efficient hedge on the payables?

Your firm has payables oustanding from an English supplier of 30 million due in 90 days. (Assume a 30/360 daycount.) There are options and a futures contract available in GBP. Details are in the tables below. Options are in 5 million increments and one futures contract is a commitment to f10 million. The current exchange rate (i.e., the spot rate) for IUSD is $1.20/1.00. A second table provides the distribution of expected spot exchange rates. Given the distribution, should you hedge? If so, what is the most efficient hedge on the Your firm has payables oustanding from an English supplier of 30 million due in 90 days. (Assume a 30/360 daycount.) There are options and a futures contract available in GBP. Details are in the tables below. Options are in 5 million increments and one futures contract is a commitment to f10 million. The current exchange rate (i.e., the spot rate) for IUSD is $1.20/1.00. A second table provides the distribution of expected spot exchange rates. Given the distribution, should you hedge? If so, what is the most efficient hedge on the