Money market hedging

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  1. Avatar of morphila morphila says:
    December 17, 2012 at 7:53 am

    im a little confused on ex7 we buy $7.8m and put on 3 month deposit which after mature pays the the $8m, we borrow 4.9 pound from bank, put on deposit and repays bank after maturity.

    • Avatar of yenuar yenuar says:
      February 4, 2013 at 12:30 pm

      Example 7 states that we have to pay $8m in 3 months. We want to eliminate the foreign exchange risk by using money market hedging. First of all, we have to borrow GBP 4,860,203.Then use GBP to buy $7,874,016 (at 1.6201). Finally, we deposit $7,874,016 at 6.4% p.a. We make $125,984 of interest on the deposit, so in 3 months we will receive exactly $8m, which we can use to settle our obligation. Also, in 3 months time we repay GBP 4,980,493 (including interest).

  2. Avatar of sliachtic sliachtic says:
    November 6, 2012 at 7:58 pm

    Amazingly simple explanation that is so easily digestable. Thanks to the tuitor’s exerience and very logical and easy to follow explanations.
    many thanks!

  3. Avatar of kwayu kwayu says:
    October 20, 2011 at 2:35 pm

    dear tutor, i’m trying to get the lecture on money market hedging but it’s not coming up!
    also the forward contract did not finish…just played 8minutes!

    thanx for huge help

  4. Avatar of goodnewskydzramedo goodnewskydzramedo says:
    May 30, 2011 at 6:21 pm

    Dear Tutor,
    I want to know the real difference between FREE CASH FLOW TO EQUITY and FREE CASH FLOW.

    I realise most study kits and examiners get to confuse the definition.

    Thanks.

  5. Avatar of wedson wedson says:
    May 16, 2011 at 8:31 am

    the lecture was good but may be due to techn it did not finish after 21min but is generaly helping on revision

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