Explanation:
$61.0 dollarsThe net yen exposure = (500,000 - 300,000) + (100,000 - 680,000) = -¥380,000; i.e., net short the currency such that if the currency appreciates, the position loses.
-¥380,000 * 2.0% / 125 = -$60.80.
Detailed walkthrough:
Calculate net long position from on-balance-sheet items:
Calculate net position from off-balance-sheet FX contracts:
Total net yen exposure:
Impact of 2.0% yen appreciation on a short position:
$60.80 ≈ -$61.0The bank experiences a loss of approximately $61.0 due to its net short yen position combined with the yen's appreciation.
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Q-500.3. The following are the foreign currency positions of a U.S. bank, expressed in the foreign currency:
| Currency | Assets | Liabilities | FX Bought | FX Sold |
|---|---|---|---|---|
| Swiss franc (CHF) | CHF 135,000 | CHF 53,000 | CHF 10,700 | CHF 16,000 |
| British pound (£) | £30,500 | £13,400 | £9,100 | £12,200 |
| Japanese yen (¥) | ¥500,000 | ¥300,000 | ¥100,000 | ¥680,000 |
The spot exchange rates are currently as follows (all given in base/quote format): USD/CHF 0.980, GBP/USD $1.56, and USD/JPY ¥125.0. If the Japanese yen appreciates by 2.0%, what is the bank's expected gain or loss (note: this is a variation on Saunders' Question #8) in US dollar terms?
A
Loss of exactly $380,000 dollars
B
Loss of about $61.0 dollars
C
Gain of about $800 dollars
D
Gain of exactly $7,600 dollars
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