Saudi Arabian economy totally based on exporting crude oil to different countries and price of crude oil is fluctuating very rapidly. In March 2020, crude price fall to negative $37 per barrels. It shows highly declining in sales value.

Required:

Explain in detail how Saudi Arabian hedge itself for falling price of crude oil. Also discuss the hedging instrument.

Question No. 2

Pakistan import is more than export and have a huge risk of currency fluctuation. Recently Pakistani currency is devalued against US dollar.

Required:

How Pakistan based company minimize the risk of currency valuation from hedging instrument. You answer covers the details explanation of all hedging instruments.

(Marks 06)

Question No. 3

State Bank of Pakistan recently announced monetary policy and cut interest rate.

Required:

Explain the impact on those company's fund who invest in money market fund or PIB's. Also discuss how it will use Forward Rate Agreement and interest rate future contract to cover it.