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Hi john could you help with this please?
In June 14 and June 2011, the forex question asked for a hedging strategy.
When using options, the answer used a forward rate to hedge the under hedged element.
However they do not do this when using the futures method. The under hedged element is left under hedged.Is there a reason the examiner only uses a forward rate when using options?
Many thanks
No – I don’t know why he did not it for both.
It is a minor point (dealing with the over/under hedge) – if you have time then do it. Otherwise just mention the possibility and you will get credit for it.
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