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Today there was a hedging question on foreign currency receipt. We were told to assume “no basis risk”. Then how are we supposed to calculate the closing price of future?
It is impossible to answer properly without seeing the whole question.
However, if there is no basis risk then it means that the relationship is linear as explained in my free lectures. Unless you were given the spot rate on the date of the transaction then you would therefore calculate and use the ‘lock-in’ rate, again as explained in my lectures.
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