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I was trying to solve questions on forward and money market hedging and i came across such a scenario:
X Co is a UK co which frequently trades in high tech goods with USA based companies.The following imports and exports are due in 6 months time:
Halo Exports to Halo imports from
Co. A pound 150,000 $ 1,000,000
Co.B nil $ 700,000
Co.C $500,000 pound 400,000Exch rates $/Pound
Spot 1.9966-2.002
6 months forward 1.9711-1.9755Annual borrowing and investing rates available to Halo are:
Sterling upto 6 months 6.5% – 5.2%
Dollar upto 6 months 5.0% – 3.0%show how 6 month risk could be managed using
forward market hedging
money market hedgingplease help.
You must watch the free lectures on foreign exchange risk management – both methods are explained in great detail in the lectures (with examples) and I cannot effectively type out the whole lecture here!
(and I cannot understand why you are attempting questions for which you have no answer!)
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