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FIN5545 Currency Futures Project.docx - FIN 5545 Project:...

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FIN 5545 Project: Currency Exchange Rate Risk HedgeDue date:4/29/2018 (end of week 7, Sunday not Monday)Submit 1 Excel file (or 1 Excel + 1 Word) to CanvasRead the Notes section at the end. It will answer questions you may have.The sample period for this project is from 3/19/2018 (today) to 4/20 (5 weeks). You willneed to collect real-time data starting from today.At 4pm, today, your company receives 12,500,000 Euros. If you convert 12.5 million Eurosnow, it will be USD 15,370,625. You are extremely happy with this current exchange rateand would take this US dollar value. But if you convert now, you have to pay a super hightax today.Instead, you decide to convert to USD in 2 months and delay paying the tax. This delayedaction comes with a big risk. Since EUR/USD exchange rate fluctuates every day, the USdollar value of your Euros in future will no longer be the same dollar amount. This risk iscalled currency risk, aka foreign exchange rate (FOREX) risk.The objective of this project is to design a strategy such that the conversion value stays asclose to $15,370,625 throughout the whole the sample period. The financial instrument forthis project is Euro FX futures contract expiring in June 2018.10 Questions (each is worth 1 point, consider each as a rubric):

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Term
Summer
Professor
NoProfessor
Tags
Management, Exchange Rate, United States dollar, Euro FX futures

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