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Dear Sir
I have a very silly doubt, based on this question. When we take buy/sell position while solving futures and options, should we base it on the Parent company?
In this case Wardegul Co needs to pay 27000000 Dinar to Euria Co.
So owe should always take the position of parent right?
Or is it based on whose hedging strategy, parent or subsidiary?Neither!
Wardegul is not paying anything to the subsidiary in Euria.
The subsidiary is receiving D27,000,000 from someone (presumably one of their customers) and wants the money to be invested in Euria.
The only relevant of Wardegul is that they have a centralised treasury function and so they will be organising how the money received by the subsidiary should be invested,
Hello,
Instead of opening a new thread can I ask my questions re the same Wardegul Co? 🙂
I got a bit confused as to why the EIR is 4.72% and not the FRA % – 5.02%. Is it because of the company being able to deposit at central base back rate minus 30 basis points?
And we calculate the difference to be paid/received by:
If CBBR > FRA => CBBR-FRA and we pay back the bank.
If CBBR < FRA => FRA-CBBR and receive the money back from the bank.So FRA rate is not the rate that we fix the interest for the company but it is rather the rate that we fix the relevant rate (CBBR, LIBOR, etc.) on. Then we need to deduct/add the basis points specific to the company to calculate the interest rate used. Am I correct? 🙂
Thank you!
Thank you for the swift reply.
It feels really comfortable to get a confirmation 🙂
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