Lets consider the euro/dollar (EUR/USD) futures. Assume a U.S. investor bought $270,000 of French notes in January
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Let’s consider the euro/dollar (EUR/USD) futures. Assume a U.S. investor bought $270,000 of French notes in January because of their much higher yields relative to U.S. notes and plans to sell them in December. We abstract from margin requirements and assume the yield curve remains flat for that time period. The investor wants to collect the higher yield without taking much exchange rate risk, which could reduce her overall return.
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Hedging Exchange Rate Risk with EURUSD Futures The investors goal is to collect the higher French note yields while minimizing exchange rate risk Here ...View the full answer
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Related Book For
Investments Analysis And Management
ISBN: 9781118975589
13th Edition
Authors: Charles P. Jones, Gerald R. Jensen
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