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What risk-averse strategy using futures could the bank adopt

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Reference no: EM132864579

Suppose a domestic bank holds Chinese Renminbi (CNY) 4,500 million worth of assets and 2,000 million worth of liabilities. The bank is expecting that the price of 1 CNY will fall from 0.1930AUD to 0.1875AUD. The price on foreign exchange futures is $0.1925/CNY now.

Problem 1: What risk-averse strategy using futures could the bank adopt? And Why?

Problem 2: Calculate the gain/loss on this trade if the price on foreign exchange futures changes to $0.1875/CNY

Reference no: EM132864579

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