A B TI D E G H - J K L M 3 4 5 1 Group assignment 2: How to manage/hedge recievable. 2 Huntsman Corporation uses a variety of Forex hedging strategies. In 2018, the company disclosed is has $581 million in Euro denominated debts. as hedge for net investments in Europe. It has $151 million in forward contract that is about one year in maturity. It also reported that the company closed out a $200 million cross currency swap agreement. For the $581 Euro demoninated debts, it reported gain of $35 millom, loss of $96 million and gain of $27 million in 2018, 2017 and 2016 respectively. 6 7 Let's see how that $151 million in Euro forward can be hedged: 8 US rate 3% 9 Germany 5% 10 Spot 1.1235 N/A forward 1.107373 11 12 1-year forward at 1.1075 13 1-year call option with strike of $1.1075 is $0.01, 1-year put option with strike of 1.1075 is $0.015 14 15 What's the gains/losses if HUN hedged with: 1 money market 2. forward 3. option 4. nothing 16 and the spot rate in one year turns out to be 1.1105? 17 A B TI D E G H - J K L M 3 4 5 1 Group assignment 2: How to manage/hedge recievable. 2 Huntsman Corporation uses a variety of Forex hedging strategies. In 2018, the company disclosed is has $581 million in Euro denominated debts. as hedge for net investments in Europe. It has $151 million in forward contract that is about one year in maturity. It also reported that the company closed out a $200 million cross currency swap agreement. For the $581 Euro demoninated debts, it reported gain of $35 millom, loss of $96 million and gain of $27 million in 2018, 2017 and 2016 respectively. 6 7 Let's see how that $151 million in Euro forward can be hedged: 8 US rate 3% 9 Germany 5% 10 Spot 1.1235 N/A forward 1.107373 11 12 1-year forward at 1.1075 13 1-year call option with strike of $1.1075 is $0.01, 1-year put option with strike of 1.1075 is $0.015 14 15 What's the gains/losses if HUN hedged with: 1 money market 2. forward 3. option 4. nothing 16 and the spot rate in one year turns out to be 1.1105? 17