An importer must pay in 6 months 1,000,000 CHF. Its reference currency is the euro. The various
Question:
An importer must pay in 6 months 1,000,000 CHF. Its reference currency is the euro. The various market conditions are as follows: - Spot exchange rate: EUR/CHF = 1.6000 - 6-month forward exchange rate: EUR/CHF = 1.6160 - 6-month interest rate in francs Swiss francs: 5% - 6-month interest rate in euros: 3% - 6-month call options in Swiss francs with euros: o Cost: 0.02 euro per Swiss franc o Strike price: EUR/ CHF = 1.6160
1) How can you hedge this position using an investment in Swiss francs so that you know exactly how many euros it costs in t=0?
2) How can you hedge this position using an investment in Swiss francs and a loan in euros so as to know exactly how many euros it costs in t=6 months?
3) How can you hedge this position using a futures contract?
4) How can you hedge this position using a currency option?
5) A priori, what is the most interesting cover?
Advanced Accounting
ISBN: 9781260247824
14th Edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik