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In questions which involve receipts to be hedged against futures market for exchange rates why are they using 2 different methods when the question overall is almost the same ?
In some answers they are calculating the receipt as-
a. contract size * no of contracts * lock in rate
whereas in some other questions the receipt is calculated as-
b. receipt in foreign currency / lock in rate
Why is this ? I cannot wrap my head around it, can someone please please get back to me at the quickest.
Please and thank you.
Please do not expect instant replies – I always reply within 24 hours but I do not sit permanently at my computer 🙂
If the question gives contract sizes then you should use contracts. (If the instruments are ‘over the counter’ (so there are no contract sizes given) then we use the exact amount.
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