A U.S. investor who holds a ￡2,000,000 investment wishes to hedge the portfolio against currency risk. The investor should:
A) sell futures for ￡2,000,000 worth of U.S. dollars.
B) buy futures for ￡2,000,000 worth of U.S. dollars.
C) sell futures for $2,000,000 worth of British pounds.
I chose B, but the answer is not....
I am holding pounds, should i buy future on: short pounds and long usd?作者: liangfeng 时间: 2011-7-11 19:20
You are long the GBP, you need to offset currency by being short the GBP (Answer A)作者: Analti_Calte 时间: 2011-7-11 19:20
you are holding pounds, so what is your risk? your risk is that the pound depreciates, so you want to short pounds (sell pound futures) to hedge that risk.作者: strikethree 时间: 2011-7-11 19:20
def A..........you want to be short pounds in future that is deliver pounds and get usd......
its easy to get caught up if u dont just focus on one side of the transaction
either look at it from the point of USD or look at it from pounds
