JC bank in Japan has committed to deliver yen in 3 months to MT Ltd in the US, a corporate customer. The spot rate is 118 yen to the dollar and the 3-month forward rate is 106 yen per dollar. In recent years, there is increasing trading dealing with foreign currency in JC bank.

-Are there costs to hedging this exposure with the forward market? Explain.

- Explain FIVE (5) reasons about the level of foreign currency trading has increased in JC bank? 

Answer rating: 100% (QA)

Costs of Hedging with the Forward Market 1 Opportunity Cost Hedging with the forward market involves fixing the exchange rate potentially missing out ... View the full answer