Forward and Options Markets Assignment | Homework For You
Clearview Software, a US exporter, is concerned about the depreciation of JPY against USD due to JPY receivables of JPY800,000,000 in 180 days. To hedge (protect himself/herself) the position, exporter decides to use a combination of the forward and options markets. The Clearview receives the following outright 180-day forward quote from its banker:
USD/JPY 118.40-118.90
Clearview sells JPY 400,000,000 to deliver in 180 days.
To cover JPY 300m portion of the receivable, the company treasurer buys an over the counter put option at a strike price of JPY120, at 2% (2% is the premium) and leaves JPY100m portion of the exposure uncovered.
At the time the option was purchased, the spot rate was USD/JPY117. Clearview’s cost of capital is 10%. What is the effective amount of dollars Clearview will get in 180 days if the spot rate on that date is USD/JPY122?
At the time the option was purchased, the spot rate was USD/JPY117. Clearview’s cost of capital is 10%. What is the effective amount of dollars Clearview will get in 180 days if the spot rate on that date is USD/JPY122? Get Finance homework help today