A German exporter wants to hedge an outflow of nzd 1m. She decides to hedge the risk
Question:
A German exporter wants to hedge an outflow of nzd 1m. She decides to hedge the risk with a eur/usd contract and a eur/aud contract. The regression output is, with t-statistics in parentheses, and R2 = 0.59:
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(a) How will you hedge if you use both contracts, and if a usd contract is for usd 50,000 and the aud contract for aud 75,000?
(b) Should you use the usd contract, in view of the low t-statistic? Or should you only use the aud contract?
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a b The tstatistic is rather low so on the basis ...View the full answer
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Related Book For 
International Finance Putting Theory Into Practice
ISBN: 978-0691136677
1st edition
Authors: Piet Sercu
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