国际金融Lecture 10

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Forward Contract
(1) If change GBP into USD at spot rate, the company has to pay: 335,570x1.49=$500,000
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Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
Currency Derivative
Currency Forward Currency Future Currency Options
Eg. Assume an American car dealer expects to import ten Jaguar motor cars in 90 days from now. The Jaguar Motor car company quotes a price for ten cars at £335,570.The current spot rate is $1.49/ £.And the forward rate quoted for 90 days is $1.4867/ £. How will the company hedge the risk?
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Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
Forward Contract
When a firm anticipate future need or future receipt of a foreign currency, they can set up forward contracts to lock in the exchange rate, hedge the risk.
Irwin/McGraw-Hill
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
Forward Contract
A forward contract is an agreement between a corporation and a commercial bank to exchange a specified amount of a currency at a specified exchange rate (called the forward rate) on a specified date in the future.
The company has saved more than $1,000 on the original contract to avoide a loss of $37,000.
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Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
10
The Currency Derivatives Market (Chapter 7)
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Essential Reading
P172ຫໍສະໝຸດ Baidu181
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(2): The importer can buy £335,570 forward for 90 days: 335,570x1.4867=$498,892
In 90 days’s time, the importer has to deliver $498,892
(3)Suppose the pound appreciates to $1.60 during the 90 days, the cars would cost the company the following amount: 1.60x335,570=537,000
Forward Contract
Example:
XYZ company, a US manufacturer receives a purchase order from a customer in England on Jan.10th. The invoice is £50,000 and payment is due on June 10th.
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Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
Forward Market
Forward contracts are used to reduce the risk that foreign exchange rate change will adversely affect transactions that will be settled in the future.
The current spot rate is $1.5530, and the forward rate is $1.5450 for six months.
If change at spot rate: 1.5530x50,000=77,650
The firm will sell £50,000 for a maturity window of June 10th through July 9th: 50,000x1.5450=$77,250