# At the start of the sample period, your company receives 2,500,000 Euros

FIN 5535
Project: Currency Hedge, Due date: 8/10/2015 (end of week 7)

The sample period for this project
is from 6/30/2015 to 7/31/2015.
At the start of the sample period,
your company receives 2,500,000 Euros, which you plan to convert into US
dollars at the end of sample period for tax reasons.
Since EUR/USD exchange rate changes
every day, the US dollar value of your Euros at the end of the sample period
will be uncertain. Your objective is to lower this exchange rate risk. You
decide to hedge this risk using EUR/USD (=Euro FX) futures contract expiring in
September 2015.
10 Questions (each is worth 1
point):
1. What’s the difference between
Euro FX futures and Eurodollar futures?
2. You are converting the currency
in late July/early August. But why do we use September 2015 futures instead of
July 2015 or August 2015 futures? And what is the contract size of the Euro FX
futures contract?
3. How many Euro FX futures contract
do you have to buy or short to hedge the risk? Specify explicitly whether you
are taking a long or short position of the Euro FX futures.
4. For every trading day (no
weekends/holidays) during the sample period, collect the daily EUR/USD exchange
rate and EUR/USD futures price. See hint #2 for how to collect historical
futures prices. Construct a spreadsheet showing both prices.
5. Assume the initial margin
requirement is \$4,000 per contract. Calculate the initial margin account
balance.
6. Calculate the futures daily
gains, cumulative gains every day.
7. Calculate the margin account
balances every day. Is there a margin call, when the maintenance margin
requirement is \$3,300 per contract? If yes, add the required cash to the margin
account to restore initial margin account requirement.
8. Calculate the values of your
unhedged position (= 2.5 mil Euros in US \$), and the values of your hedged
position (= unhedged value + futures cumulative gain).
9. Plot the unhedged values and
hedged values in Q7 over time. In addition, calculate the standard deviations
of the unhedged values and that of the hedged values in Q7. Discuss the
results.
10. Using Q9 answers, confirm that
you successfully lowered the exchange rate risk.
Hints:
columns for each trading date: 1) Date, 2) EUR/USD exchange rate, 3) EUR/USD
futures price, 4) Futures daily gain, 5) Cumulative gain, 6) Margin account
balance, 7) Unhedged value and 8) Hedged value (= unhedged value + cumulative
gain).
2. Use.tradingcharts.com/currency_futures.html”>.cmegroup.com/”>http://www.cmegroup.com/ (where EUR/USD futures contracts
are traded) to locate the EUR/USD futures and collect the futures prices. The
screenshot below shows that the EUR/USD futures price on 12/22/2014 was 1.2239.
.gif”>

3. To collect EUR/USD exchange rate, you can use any
resource such as Bloomberg, Google or Yahoo . However, using a resource with 4
decimal points will give you the best results showing a successful hedging at
the end.

4. As of 6/29/2015, 2.5 mil Euros is worth \$2,778,500. If
your unhedged values differ more than \$500,000 from this number, check your
data and re-calculate.

5. How to calculate futures daily gains, cumulative gains is
explained in page 26-27 or review Week 1 files.

Calculate the price
Pages (550 words)
\$0.00
*Price with a welcome 15% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
How it works
Receive a 100% original paper that will pass Turnitin from a top essay writing service
step 1
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
Pro service tips
How to get the most out of your experience with Essay Fountain
One writer throughout the entire course
If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.
The same paper from different writers
You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."
Copy of sources used by the writer
Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.
Testimonials
See why 20k+ students have chosen us as their sole writing assistance provider
Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.
WRTG 393 6360 Advanced Technical Writing (2222)WRTG-393
Patience and truly superb service considering all the information was not uploaded.
Customer 452995, February 4th, 2022
Marketing
Excellent and thank you!
Customer 452591, December 12th, 2020
Professional Writing Engl-3311
Thank you
Customer 452919, March 2nd, 2023
Sociology
Thank you
Customer 452919, February 16th, 2024
Thank you sincerely great paper and content
Customer 452793, June 22nd, 2021
Sociology
Thanks to the entire Team of Solutions.
Customer 452919, March 29th, 2022
Sociology
Thank you for your teamwork. I have only used Solutions to assist me with my assignments.
Customer 452919, March 1st, 2023
Psychology
Communication on the small delay was appreciated and final result was worth the wait. Thank you.
Customer 452665, March 18th, 2021
Nursing
n/a
Customer 452725, April 23rd, 2021
Sociology
I eant to thank the enttir team. A special thanks to Simon!
Customer 452919, November 2nd, 2021
Sociology
Thank you
Customer 452919, March 23rd, 2022
Nursing
Very good service
Customer 453075, April 27th, 2022
11,595
Customer reviews in total
96%
Current satisfaction rate
3 pages
Average paper length
37%
Customers referred by a friend