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Hello
Do we assume when the examiner mentions “4 months time” with no actual start date that where he is is at the beginning of the month. He says payment in 4 months time with a six month future….1st…15th….20th???
You will have to refer me to a specific question – the questions do usually make it clear.
Specimen Exam applicable from September 2018
Section A – This ONE question is compulsory and MUST be attempted
Cocoa-Mocha-Chai (CMC) Co
Advise CMC Co on an appropriate hedging strategy to manage the foreign exchange exposure of the US$ payment in four months’ time. Show all relevant calculations, including the number of contracts bought or sold in the exchange-traded derivative markets.
In this question, the date is not relevant because you are told that the futures and options are in 3 months and in 6 months time (as opposed to being told that they are March futures, or June futures etc..).
4 months from now is 1 month more than in 3 months time, and 2 months less than in 6 months time. What exact date is of no relevance.For futures hedge on the $5.06million, why the predicted futures rate need to multiply with 1/3? What does 1/3 represent ?
You can find a lecture working through the whole of this question linked from the following page (which does answer your question).
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