Calculate number of futures contracts required for a hedge

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Reference no: EM131178765

Consider a U. S. firm with receivables of BRL 500,000 in 25 days. It hedges this position using a CME BRL futures contract maturing in 45 days. The futures contract size is BRL 100,000. A financial analyst notes that the BRL futures contract tends to change by USD 0.0066 in response to a USD 0.010 change in BRL. Calculate the number of futures contracts required for a hedge. Indicate whether the futures position is long or short.

Reference no: EM131178765

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