Explanation:
The correct answer is A. CHF appreciation against EUR; sell CHF against buying EUR forward.
Reasoning:
Option (B) is incorrect because selling EUR/buying CHF forward would increase the company's long CHF exposure rather than hedge it.
Ultimate access to all questions.
192.4. A French company manufactures and sells products in and for the EU market. The company sources input components from Switzerland, paying the invoices for these inputs in Swiss francs (CHF). What is a French company's currency risk, and how can it hedge? (Note: modified version of handbook example 11.4.)
A
a) CHF appreciation against EUR; sell CHF against buying EUR forward
B
b) CHF appreciation against EUR; sell EUR against buying CHF forward
C
c) CHF depreciation against EUR; sell CHF against buying EUR forward
D
d) CHF depreciation against EUR; sell EUR against buying CHF forward
No comments yet.