A Japanese firm will be collecting the procedures for a car export to Thailand in 180 days.
Question:
A Japanese firm will be collecting the procedures for a car export to Thailand in 180 days. Money will be received in thai bahts and treasurer of the japanese firm is afraid of forex risk, so she wants to hedge this transaction. Calculate results of hedging with forward and money Market, considering the following data:
180 day account receivable: 10 million thai bats
Spot rate: 43 bahts/$Spot rate: 113.5/$
180 days Fwd: 49 bahts/$180 days Fwd: 115/$
Int rate in bahts: 11% per annumint rate in yens: 2% per annum
Consider options on yens paid with bahts. Should you buy a call or a put to hedge this position?
If E= 0.45 b/yen and option prices are: c=0.05 baht per yen and p=0.10 baht per yen, calculate results hedging with option chosen. At what future spot rate do you think this Japanese firm will be indifferent between option and M-M hedging?