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Portfolio of japanese securities worth

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Consider a U.S. investor who owns a portfolio of Japanese securities worth 160 million japanese yen. In order to hedge to currency risk, he considers buying currency puts on yen instead of selling futures contracts. In Philadelphia, a yen put with a strike price of $0.62 per 100 yen and three- months maturity is worth $0.007 per 100 yen (0.007) cents per yen). The current exchange rate is 158 yen/$

Assume that three months later the portfolio is still worth 60 million yen. Compare the results on the following two currency-hedging strategies values of the exchange rate three months later of 140 yen/$, 150 yen/$, 258 yen/$, 170 yen/$, and 180 yen/$. In he first strategy, the investor sells 160 million yen foward; in the second strategy, he buys yen puts for 160 million yen

Reference no: EM131318391

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