Using the American term quotes from Exhibit $5\mathrm{.}7,$ calculate a cross$-$rate matrix for the euro, Swiss

franc, Japanese yen, and the British pound so that the resulting triangular matrix is similar to the portion above the diadonal in exhibit $5\mathrm{.}8.$

$5\mathrm{.}7$ a Closing out a futures contract: Ms B closes out at the end of Day $2$ by selling a futures contract

$\backslash$table$[[,$Days,$],[,0,1,2,3,4,5],[$per unit:,,,,,,$],[$Futures price,$$1\mathrm{.}31,$$$1\mathrm{.}32,$$$1\mathrm{.}30,$$$1\mathrm{.}33,$$$1\mathrm{.}35,$$$1\mathrm{.}33],[$Change in price,,$$0\mathrm{.}01,($$$0\mathrm{.}02),$$$0\mathrm{.}03,$$$0\mathrm{.}02,($$$0\mathrm{.}02)],[$payments:$,,,,,,],[$Ms A$,$ seller to Ms B$,,($$$0\mathrm{.}01),$$$0\mathrm{.}02,($$$0\mathrm{.}03),($$$0\mathrm{.}02),$$$0\mathrm{.}02],[$Ms B$,$ buyer from Ms A$,,$$$0\mathrm{.}01,($$$0\mathrm{.}02),$$$0\mathrm{.}03,$$$0\mathrm{.}02,($$$0\mathrm{.}02)],[$Ms B$,$ seller to Ms C$,,-,-,($$$0\mathrm{.}03),($$$0\mathrm{.}02),$$$0\mathrm{.}02],[$Net position of Ms B$,,$$$0\mathrm{.}01,($$$0\mathrm{.}02),$$$0\mathrm{.}00,$$$0\mathrm{.}00,$$$0\mathrm{.}00],[$Ms C$,$ buyer from Ms B$,,,,$$$0\mathrm{.}03,$$$0\mathrm{.}02,($$$0\mathrm{.}02)]]$

e accounts of the buyer and seller are credited and debited each day.

ere is no net liability $-$ the payments column always sums to zero each day. EXHIBIT $5\mathrm{.}7$ b Futures contract default: Ms B defaults at the end of day $2$ and the contract is taken over by Ms C

$\backslash$table$[[,$Days$],[$per unit:,$0,1,2,3,4,5,],[$Futures price,$$1\mathrm{.}31,$$$1\mathrm{.}32,$$$1\mathrm{.}30,$$$1\mathrm{.}33,$$$1\mathrm{.}35,$$$1\mathrm{.}33,],[$Change in price,,$$0\mathrm{.}01,($$$0\mathrm{.}02),$$$0\mathrm{.}03,$$$0\mathrm{.}02,($$$0\mathrm{.}02),],[$payments:$,,,,,,,],[$Ms A$,$ seller to Ms B$,,($$$0\mathrm{.}01),$$$0\mathrm{.}02,($$$0\mathrm{.}03),($$$0\mathrm{.}02),$$$0\mathrm{.}02,],[$Ms B$,$ buyer from Ms A$,,$$$0\mathrm{.}01,($$$0\mathrm{.}02),,,,],[$Ms C$,$ new buyer,,,,$$0\mathrm{.}03,$$$0\mathrm{.}02,($$$0\mathrm{.}02),]]$

Note: EXHIBIT $5\mathrm{.}8$ The swap arrangement for ABC Ltd example in the text

Without a Swap

With a Swap

$77,517$

Conversion value of $100,000$

Convert about

$10,000$ in the

Foreign Exchange

Market