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Characterize the fi risk exposure to fluctuations

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Reference no: EM133075047

The following are the net currency positions of a U.S. FI (stated in U.S. dollars).

Note: Net currency positions are foreign exchange bought minus foreign exchange sold restated in U.S. dollar terms.

Currency

Net Position

Canadian Dollar

+U.S. $1,200

Euro

-U.S. $245,900

Japanese Yen

+U.S. $505,000

Swiss Franc

-U.S. $36,700

British Pound

+U.S. $447,900

How would you characterize the FI's risk exposure to fluctuations in the Euro to dollar exchange rate?

Group of answer choices

  • The FI has a balanced position in the Euro.
  • The FI is net short in the Euro and therefore faces the risk that the Euro will rise in value against the U.S. dollar.
  • The FI is net long in the Euro and therefore faces the risk that the Euro will rise in value against the U.S. dollar.
  • The FI is net short in the Euro and therefore faces the risk that the Euro will fall in value against the U.S. dollar.
  • The FI is net long in the Euro and therefore faces the risk that the Euro will fall in value against the U.S. dollar.

Reference no: EM133075047

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