Reference no: EM133073254
Suppose you are the risk manager of a Swiss beer exporter that regularly sells in the United States. The mission of your department is to minimize currency exposure, using currency futures and currency options.
On the 18th of September, 2021, you received a purchase order for 30,000 barrels of beer from a U.S. wholesaler at a wholesale price of US$32.75 per barrel. The U.S. wholesaler agreed to pay on the 28th of October, 2021.
Assume it is now October 28, 2021, and you have just received the payment from your U.S. wholesaler. Use the attached exchange rates and prices of financial instruments to answer the following questions.
1. Assume that you hedged with futures. Explain what kind of transaction you would make in the futures market on October 28. What would your total gain or loss have been? Use the settlement prices.
2. Assume you hedged options, what would your total gain or loss have been? Explain what kind of transaction you would make in the options market on October 28 and/or on the expiration date of the options in mid-December. What would your total gain or loss have been?