In October, a Denver Import Company is expecting in December to have to pay a bill to its Euro suppliers
for 8,125,000 Euros and wants to hedge against a rise in the value of the Euro relative to the U.S. dollar in December when the payment is due.
At this time the spot exchange rate Euro is $1.1079 USD. The CME Group future settle rate for a December Euro FX futures contracts is 1 Euro = $1.1337 USD, with each futures contract for 125,000 Euros per contract.
b. Suppose in December the spot rate for the Euro changes to $1.2345 USD and the Euro futures FX price changes to $1.2607 USD. Calculate the spot opportunity loss or gain for the company and the futures gain or loss. What is the net hedging result?
Spot Gain or Loss ____________ Futures Gain or Loss ___________
Net Hedging Result _____________