a) Your company has just exported crude palm oil to a Japanese customer. You will receive...

 

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a) Your company has just exported crude palm oil to a Japanese customer. You will receive 30 million yen in 90 days. Do you have any exposure? Suppose forward, futures and options were available on the currency, which would be the best instrument to hedge? Explain why. b) You own an American style call option on a stock. The option has two more weeks to maturity but is already in the money. Which would be the preferable course of action, exercise the options or selling them? Justify your answer. a) Your company has just exported crude palm oil to a Japanese customer. You will receive 30 million yen in 90 days. Do you have any exposure? Suppose forward, futures and options were available on the currency, which would be the best instrument to hedge? Explain why. b) You own an American style call option on a stock. The option has two more weeks to maturity but is already in the money. Which would be the preferable course of action, exercise the options or selling them? Justify your answer.

Answer rating: 100% (QA)

a To determine if there is any exposure in this scenario we need to consider the potential exchange rate risk If you are receiving 30 million yen in 9... View the full answer