A US firm sold goods to a British firm at an agreed price of 2,812,500 GBP which it will receive in December. The
choose to manage this exposure using CME futures contracts:
-Contract: GBP / USD Futures
size: 62,500 GBP
maintenance margin: 1500USD
initial margin: 110% of maintenance margin
settlement: physical delivery
current spot value of the pound is 1.6524
a) how many futures contracts will they use to hedge their exposure and will they buy or sell said futures ?
b) what is the total size of the margin that would be required at the beginning to hedge this exposure ?
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