Financial Risk Manager Part 1
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Current spot USD/CHF rate: 1.3680 (1.3680CHF = 1USD)
3-month USD interest rates: 1.05%
3-month Swiss interest rates: 0.35%
(Assume annually compounding)
A currency trader notices that the 3-month future price is USD 0.7350. In order to arbitrage, the trader should investment:
Current spot USD/CHF rate: 1.3680 (1.3680CHF = 1USD)
3-month USD interest rates: 1.05%
3-month Swiss interest rates: 0.35%
(Assume annually compounding)
A currency trader notices that the 3-month future price is USD 0.7350. In order to arbitrage, the trader should investment:
Exam-Like
A
Borrow USD, convert to CHF at spot, invest CHF, and sell CHF forward
B
Borrow CHF, convert to USD at spot, invest USD, and buy CHF forward
C
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