What would be an effective hedge ? A U.S. firm holds an asset in Great Britain and

What would be an effective hedge ?


 

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A U.S. firm holds an asset in Great Britain and faces the following scenario: Probability Spot rate State 1 25% $ 2.20/ State 2 50% $ 2.00/ State 3 25% $ 1.80/E P' 3,000 2,500 2,000 P $6,600 $5,000 $3,600 where, P=Pound sterling price of the asset held by the U.S. firm P=Dollar price of the same asset A U.S. firm holds an asset in Great Britain and faces the following scenario: Probability Spot rate State 1 25% $ 2.20/ State 2 50% $ 2.00/ State 3 25% $ 1.80/E P' 3,000 2,500 2,000 P $6,600 $5,000 $3,600 where, P=Pound sterling price of the asset held by the U.S. firm P=Dollar price of the same asset