wake2000

niraj_a Wrote:
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> shouldn't just the principal be hedged? am i
> remembering some other LOS?

Me too; I remember that question on a mock exam or something and I got it wrong because I tried to get all fancy. I believe that you just hedge the principal and the forward price will incorporate the interest earned. So really you hedge $30m of notional which will cost you $29.XX million dollars at which point you get the $30m in the end. That's how it works in the real world anyways.