An energy company located in russia has entered into a, Ask an Expert

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An energy company located in Russia has entered into a contract to export natural gas into Europe with delivery in three months. The contract is denominated in EUR and is valued at EUR100 million. The spot exchange rate is EUR/RUB49.2820. Assume that the spot rate in three months’ time is EUR/RUB46.6060 and that there is no basis risk between the futures market and the spot FX markets.

a) Set up a hedging strategy using the futures market. Show your calculations. Explain the outcomes of the strategy. Assume that EUR futures have a face value of EUR 100,000 per contract.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92786363

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