Question: Calculate the expected cash flows (and standard deviation, where appropriate) for all hedging possibilities and select the most appropriate hedging tool. Company X and payables

Calculate the expected cash flows (and standard deviation, where appropriate) for all hedging possibilities and select the most appropriate hedging tool.

Company X and payables of 2,988,760 Yen in 9 months. The spot JPYUSD is 0.0087. The forecast indicates that the Yen could either end up with a value of $0.0083 (24% chance), a value of $0.0088 (54% chance), or a value of $0.0093 (22% chance). The US interest rates are: deposit 3.99% and borrowing 4.01% and the Yen rates are: deposit 3.68% and borrowing 3.72%, 9-month forwards on the Yen are priced for $0.0087. Put options with 9-months expiration and strike price of $0.0089 are available for a premium of USD $0.000026 and call options with 9 months expiration and strike price of $0.0092 are available for a premium of USD $0.000027.

Calculate the expected cash flows (and standard deviation, where appropriate) for

Calculate the expected cash flows and standard deviation, where appropriate) for all hedging possibilities and select the most appropriate hedging tool. Company X has payables of 2,988,760 Yen in 9 months. The spot JPYUSD is 0.0087. Forecast indicates that the Yen could either end up with a value of $0.0083 (24% chance), a value of $0.0088 (54% chance) or a value of $0.0093 (22% chance). The US interest rates are: deposit 3.99% and borrowing 4.01% and the Yen rates are: deposit 3.68% and borrowing 3.72%. 9-month forwards on the Yen are priced for $0.0087. Put options with 9 months expiration and strike price of $ 0.0089 are available for a premium of USD $0.000026 and call options with 9 months expiration and strike price of $ 0.0092 are available for a premium of USD $0.000027. Calculate the expected cash flows and standard deviation, where appropriate) for all hedging possibilities and select the most appropriate hedging tool. Company X has payables of 2,988,760 Yen in 9 months. The spot JPYUSD is 0.0087. Forecast indicates that the Yen could either end up with a value of $0.0083 (24% chance), a value of $0.0088 (54% chance) or a value of $0.0093 (22% chance). The US interest rates are: deposit 3.99% and borrowing 4.01% and the Yen rates are: deposit 3.68% and borrowing 3.72%. 9-month forwards on the Yen are priced for $0.0087. Put options with 9 months expiration and strike price of $ 0.0089 are available for a premium of USD $0.000026 and call options with 9 months expiration and strike price of $ 0.0092 are available for a premium of USD $0.000027

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