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Can u please tell me how the netting is carried out in Hedging question of December 2005.
How dollar hedge amount is 90+50+40+20+30-170-50 = 110,000 payment
How Euro hedge amount is 75+85+72+20+52+35-72-35-50-20-65 = 97,000 receipt?
The figures that you
The question says how many dollars each company in the group will receive.MJY will receive $90 from Co1 and $50 from Subsidiary 2
Subsidiary 1 will receive $40 from Co 3 and $20 from Co 4
Subsidiary 2 will receive $30 from Co 4
Total $230It also says in the question how many dollars each company in the group will pay.
MJY will pay $170 to Co 2
MJY will pay $120 to Co 3
Subsidiary 2 will pay $50 to MJY.
Total $340So the net total is a payment of $340 – $230 = $110
You could, of course, ignore the $50 going from Subsidiary 2 to MJY from both, because it is within the group. The net payment outside of the group would not change.
The Euro amount is calculated in exactly the same way – how many €’s the group companies will receive, less how many €’s the group company will pay.
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