标题: Question on Currency rate convention [打印本页] 作者: pimpineasy 时间: 2011-7-11 19:39 标题: Question on Currency rate convention
So for Level III, the CFA uses only the direct quote as far as I've seen. I have a question on the convention used though...
Let's say you're a US company, with operations in the eurozone. You expect to receive 1,000,000 euros in 3 months. The current 3-month forward quote is 1.50 USD/EUR. If you want to fully hedge, is the convention that you would go long or short the 1.50 USD/EUR contract?作者: wake2000 时间: 2011-7-11 19:39
short euros in the contract作者: Roflnadal 时间: 2011-7-11 19:39
you only need to choose long or short the foreign currency no matter the quote method作者: jmh530 时间: 2011-7-11 19:39
Just think of it more as do you want to buy currency or sell currency. If I have Yen and I am a US investor, I don't want Yen, I want to sell Yen for dollars. So I'll sell Yen contracts. Or I can buy U.S. contracts, which is the same thing because I am selling my yen and buying U.S. dollars.作者: bodhisattva 时间: 2011-7-11 19:39
Abushey, I get what you're trying to ask.
I think I'll think of it as being offered 1.5 USD for 1 EUR. therefore, I'll go short on the contract. (selling 1 EUR for 1.5 USD)
though i may be wrong. I just hope they ask us in plain language which currency to short!
