A Russian company must pay to its Swiss subcontractor 6 0 6 0 0 0
Question:
A Russian company must pay to its Swiss subcontractor Swiss francs CHF for the trade agreed today. The payment is due in the middle of June.
To what kind of currency risk is the Russian company How could it hedge best against that risk with using either June euro futures for which the contract size is CHF or June ruble futures for which the contract size is RUB The current spot rate for CHF is rubles, whereas the corresponding June futures rate is rubles. The delivery date for the currency futures is the third Wednesday of contract month.
By the middle of June the franc has appreciated against the ruble so that the spot rate is then Assess the efficiency of hedging by calculating the profits and losses from spot and futures transactions Assume that the convergence of spot to futures has decreased the basis to zero by the middle of June
Government and Not for Profit Accounting Concepts and Practices
ISBN: 978-1118155974
6th edition
Authors: Michael H. Granof, Saleha B. Khumawala