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Unformatted text preview: Fin 350, Exercises 3, Ch6 FX Markets 1. (Spot Quotations) Two banks give the following quotes on the euro at the same time: Citibank NY $1.1840-60/ Barclays London: $1.1820-38/ (1) What types of quotes are from the banks (from the USs perspective), direct or indirect? (2) What are the bid prices and ask prices of from the banks? (3) What are the bid prices and ask prices of $ from the banks? (4) Do you see a chance of profit from these quotes? 2. (Triangular Arbitrage) Citibank quotes $1.92/; UBS quotes 1.50/; Deutsche Bank quotes $1.15/. Can you profit from these rates? If so, describe your steps and calculate your profit in dollars as well as euros with $1,000,000 investment. 3. (Exchange rate changes) Calculate the percentage change in exchange rates. S1 S2 Change in Exchange Rates Peso4/$ Peso10/$ $1.4/ $1.6/ 120/$ 100/$ 4. (Forward transactions and hedging)A dealer sells 20,000,000 forward for dollars for delivery in three months at $1.5420/. Analyze risk that the dealer is facing and provide a possible solution to hedge such risk. and provide a possible solution to hedge such risk....
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This note was uploaded on 12/06/2011 for the course FIN 536 taught by Professor Staff during the Fall '11 term at S.F. State.
- Fall '11