Determining the hedge with derivatives

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Reference no: EM131317603

Hedge with derivatives

A Chinese company located in Shanghai is due to pay 7,754,300 HKD onDecember 31st. 2016 (Now October 1st.) they want to use a derivative to hedge the risk they are exposed to. Please enlighten them listing the advantages, disadvantages, potential costs and results using:

  • A Future contract listed in CME - 90 day (Oct-Dec.)
  • A Forward contract with an investment bank
  • An option contract listed in CME 90 - day (Oct-Dec.)
  • A swap contract with an investment bankRemember the currencies involved: CNY, HKD and USD

Try to be as detailed as you can to illustrate your suggestions, the language you use must be formal and assertive, check the math properly. You will have to make several major assumptions, but try to make them as close to reality as you can (make inquiries and research)

Reference no: EM131317603

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