FX hedging

1. When we are not told what the spot rate is on the date of the transaction (which is most often the case these days), then we use the lock-in rate (which is the net effect of converting at the future spot together with the gain or loss on the futures). I do explain what the lock-in rate is, and how we calculate it, in my lectures. 2. There are arguments for using the mid-market price or just the relevant spot rate, when calculating the basis. Using either will get the marks in the exam, provided (as always) that your workings make it clear to the market what you are doing. Obviously it will result in a different final answer, but in Paper AFM there is rarely just one 'correct' answer, which is why it is the workings that get the marks rather than just the final result :-)