In 1985, Japan Airlines (JAL) bought $3 billion of foreign exchange contracts at 180/$1 over 11 years
Question:
a. What was the likely economic rationale behind JAL's hedges?
b. Did JAL's forward contracts constitute an economic hedge? That is, is it likely that JAL's losses on its forward contracts were offset by currency gains on its operations?
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a Most likely JAL had signed contracts to take delivery of planes in the future and was using forwar...View the full answer
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