You Own A Us Company With Borrowings From Switzerland Over The Next Few Months Your 2816651

You own a US company with borrowings from Switzerland. Over the next few months, your loan repayment of CHF 50 million is due. Given the foreign exchange market movements, you would like to minimise the impact on your cash outflow. Based on the following data, devise a suitable strategy. Evaluate your chosen strategy against suitable alternatives for a range of expected future spot rates.

Spot rate = 0.9888 CHF/USD
3 month forward rate = 3 month future rate = 0.9796 CHF/USD

Option Premia:

StrikePrice Call Option Put Option

0.9850 0.0108 0.0146

0.9900 0.0087 0.0175

Each option contract has a size of 125,000 Swiss Francs.

Prof. Angela


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