In: Finance
You are a US firm and expect to receive 10,000,000 Malaysian Ringitt (MR) from a customer for sure after six months. How would you achieve a complete hedge if you had the following: Spot rate $0.22/MR, six month US$ risk-free rate = 2.5 percent and six month MR risk-free rate is 3.5 percent. Describe the transactions in detail. 2 Suppose the payment in MR from your customer is not certain, and, in addition to the spot and risk-free rates mentioned above, you also have an options market in which MR calls trade. How would you construct the appropriate hedge in this case? Describe the transactions in detail.