You are a price maker running the AUD/USD options book for your bank. Your customer is a wheat exporter who receives payment in USD, but they need to convert these receipts to AUD. Your customer is required to hedge their FX risk on an upcoming exposure. They are VERY bullish on the AUD/USD rate. Unhedged, a stronger AUD/USD rate is blank to their profitability. Given their outlook for the currency, the most appropriate hedging stratey would be to: blank

Your organization has a transaction risk related to USD sales receipts. The organization's risk policy requires that all foreign currency exposures are hedged. Hedging a foreign currency transaction exposure means that you have:Group of answer choicesReduced the foreign currency risk appetiteReduced the standard deviation of the foreign currency.Reduced the probability of foreign currency fluctuationsReduced the consequence of foreign currency fluctuations

You are a price maker. The bid for the AUD/USD is 0.7463. What price do you need to show to attract a customer wanting to sell AUD?

You are presented with the following maket data relating to AUD/USD: Spot: 0.6600Exchange rate (AUD/USD) rt: 8.00%Terms currency interest rate rc: 11.00%Risk-free rate T: 0.2500Time to maturity (years) Sigma: 20.00%Volatility R/R adjustment: 1.00%..for calls Determine the strike rate of the AUD put in relation to a 25.0% delta risk-reversal. (Please round your exchange rate to 4 decimal places)

Question 1 (12 marks) Imagine you are the treasurer of a NZ company exporting dairy products to the United States. All revenues are received in USD and all other expenses (e.g., R&D costs, costs of employees etc.) are incurred in NZ dollars. Required: (a) Discuss whether you need to hedge the foreign exchange risk and factors you need to consider when designing contracts to hedge the risks. (6 marks) (b) If the company is able to raise the price of its product in USD if NZD appreciates without affecting the sales volume, how would you adjust your recommendation in part (a) and sell your strategy to other executives? (6 marks) Provide a typewritten answer to (a) and (b) in no more than one-half (1/2) of a page in total. Hint: If the company is able to raise the price of its product in USD if NZD appreciates, what does it tell you about the company’s foreign exchange exposure? Which derivative security (securities) could be used to hedge this risk? There is no model answer to this question, you just have to provide reasoned explanations.

Using the AUD/USD and USD/JPY rates provided, select the correct AUD/JPY cross rate: AUD/USD: 0.7442 USD/JPY: 111.88 a. 0.0067 b. 83.2611 c. 83.26 d. 150.34