international finance - group assignment

!" Lati#a Al Fa$%el &'('20)& BSB – 7302 International Finance -Group Project

BLUE SEAR CARS

A%*a$ Al S%ari# – 20)200))2  +a,en  +a,en ael Al%u!!ain Al%u!!ain – 20))000&( Alaa .a!i* Raja/ - 20)0007)

Content! Executive summary................................................................................3 2"0 Intro$uction Intro$uction........................................................................................4 ........................................................................................4 3.0 Hedging strategy.............................................................................. strategy.............................................................................. 5 3") Euro Pa1*ent Pa1*ent e$in Strate1"""""""""""""""""""""""""""" Strate1"""""""""""""""""""""""""""""""""""""""""""""""""""""""" """""""""""""""""""""""""""" """"""""""""""" """""""""""""" " & 3"2 .P+ . P+ Pa1*ent e$in Strate1""""""""""""""""""""""""""" Strate1"""""""""""""""""""""""""""""""""""""""""""""" """"""""""""""""""""""""""""""""""""""""""""""" """""""""""""""""""""""""""" & 3"3 GBP Pa1*ent Pa1*ent e$in Strate1"""""""""""""""""""""""""""""""""""""""""""" Strate1""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" """"""""""""""""""""""""" """4 """ 4 3"5 .P+ . P+ Pa1*ent e$in Strate1""""""""""""""""""""""""""" Strate1"""""""""""""""""""""""""""""""""""""""""""""" """"""""""""""""""""""""""""""""""""""""""""""" """""""""""""""""""""""""""" 4 3"& 68 Pa1*ent e$in Strate1"""""""""""""""""""""""""""""""""""""""""""" Strate1""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" """"""""""""""""""""""""""" """" 4 4.0 Outlook and Research.......................... Research.................................................................. ........................................ ..... 7 5") Factor! Factor! a9ectin t%e :alue o# t%e currenc1"""""""""""""""""""""""""""" currenc1"""""""""""""""""""""""""""""""""""""""""""""" """"""""""""""""""""""""""" """"""""" 7 5"2 Currenc1 Currenc1 pairin""""""""""""""""""""""""""" pairin""""""""""""""""""""""""""""""""""""""""""""""" """"""""""""""""""""""""""""""""""""""" """"""""""""""""""""""""""""""""""""""""""""""""" """""""""""""""""""""""""""""" ( 4.2.1 USD""""""""""""""""""""""""""""""""""""" """"""""""""""""""""""""""""""""""""""""""""""""""""""""" """"""""""""""""""""""""""""""""""""""" """""""""""""""""""""""""""""""""""""""""""""""""""" """"""""""""""""""""""""""""""""" ( 3.2.2 EUR/USD (Euro against 1 USD) """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""( 4.2.3 GBP/USD (British Pound against 1 USD) """""""""""""""""""""""""""""""""""""""""""""""""""""" 4.2.4 USD/JPY (Yen against 1 USD) """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""")0 4.2. USD/!"D (!"D against 1 USD) """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""))

5"3 ;ec%nical Anal1!i!""""""""""""""""""""""" Anal1!i!""""""""""""""""""""""""""""""""""""""""""" """""""""""""""""""""""""""""""""""""""" """""""""""""""""""""""""""""""""""""""" """"""""""""""""""""""""""""" """"""""" )2 5.0 Evaluation......................................................................................13 &") Calculation!"""""""""""""""""""""" Calculation!"""""""""""""""""""""""""""""""""""""""""" """""""""""""""""""""""""""""""""""""""" """""""""""""""""""""""""""""""""""""""" """"""""""""""""""""""""""""""""""""""" """"""""""""""""""" )3 &"2 e$in Strate1"""""""""""""""""""""""""""""""""" Strate1""""""""""""""""""""""""""""""""""""""""""""""""""""" """"""""""""""""""""""""""""""""""""""""""""""" """""""""""""""""""""""""""" """"""""""" )3 &"2") Euro Pa1*ent e$in Strate1 Calculation!""""""""""""""""""""""""""""""""""""""""" Calculation!""""""""""""""""""""""""""""""""""""""""" "")3 &"2"2 .P+ Fir!t Pa1*ent e$in Strate1 Calculation!"""""""""""""""""""""""""""""""""""""")5 &"2"3 GBP Pa1*ent Pa1*ent e$in Strate1 Calculation!""""""""""""""""""""""""""""" Calculation!"""""""""""""""""""""""""""""""""""""""""""" """"""""""""""" )& &"2"5 .P+ !econ$ Pa1*ent Strate1 Calculation!"""""""""""""""""""""""""""""""""""""""""" Calculation!"""""""""""""""""""""""""""""""""""""""""""""""")4 """""")4 &"2"& 68 Pa1*ent Pa1*ent Recei
'((endices..........................................................................................%1

Executive summary

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 ;%e #ollo>in report con!i!t! o# #our *ain part! t%at %a! to $o >it% t%e appl1in o# currenc1 $eri #ollo>in in?? e$in e$in  !trate1@ =utloo an$ Re!earc%@ Ee %a #ollo>in in tran!action!? US8'EUR call option contract@ US8'.P+ #or>ar$ contract@ US8'GBP Call option option Contra Contract@ ct@ US8'. US8'.P+ P+ For> For>ar ar$ $ Contr Contract act@@ an$ an$ US8'6 US8'68 8 For>ar or>ar$ $ Contra Contract" ct" Rear$in t%e outloo an$ re!earc%@ a clear anal1!i! an$ ein !%o>in t%e *o an$ inDo> pa1*ent!"  ;%e outloo an$ re!earc%@ re!earc%@ t%at inclu$e$ ure! c%at! an$ tren$ anal1!i!@ %a! /een /een con$ con$uc ucte te$ $ on t%e t%e curr curren enci cie! e! *a$e *a$e ai$e ai$e$ $ i! in $eci $eci$i $in n >%ic >%ic% % %e$ %e$in in  !trateie! !%oul$ /e applie$" Anal1,in t%e currenc1 rate! $urin t%e la!t it% t%e co*pan1! tran!action! >ere appreciatin aain!t t%e US8 currenc1" :ariou! *et%o$! %ae >ere a/le to ee %aea! re!ulte$ in t%e !econ$ pa1*ent o# t%e .P+@ t%at i! $ue to t%e *i!interpretation o# t%e tren$ an$ nu*/er!" In or$er to /oo!t t%e prot o# t%e enterpri!e >e ina! !aere a/le to *ae a total prot o# 4&"3074" e >ere a/le /1 t%e en$ o# t%e perio$ to %aa! calculate calculate$ $ /1 !u/tract !u/tractin in t%e total inDo>! #ro* t%e outDo>! inclu$in t%e ine %ae %a$ t%rou%out %i! journe1@ >e %aill >ill en%a en%anc nce e an$ an$ i*pr i*pro< o
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%.0 )ntroducti )ntroduction on  ;%e #ollo>in report carrie! out a re!earc% re!earc% an$ a!!e! t%e entr1 into currenc1 currenc1 $eriill *ae an$ receiill /e $i!cu!!in $i!cu!!in t%e %e$in !trateie! /1 !%e$$in li%t on %o> t%e1 >ill /e *anae$ in t%e FK *aret@ t%en oin oritten /1 t%e CF= o# Blue Sea Car! Pri
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3.0 Hedging strategy e !tu$ie$ t%e *aret #ro* all a!pect!@ in or$er to /e a/le to c%oo!e t%e /e!t %e$in !trate1@ >%ic% >ill ena/le to protect u! #ro* an1 ri! t%at *i%t appear in t%e #uture" E!peciall1 t%at *o!t currencie! %a$ a lot o#  Ductuation! an$ are e al!o *a$e !ure t%at >e !tu$1 t%e currenc1 pairin correctl1" etoro  ;%e Currenc1 Currenc1 pair! >ere c%o!en /a!e$ on t%e outDo>! an$ inDo>!@ an$ /a!e$ on t%e pa1*ent! t%e enterpri!e %a! to *ae@ all o# t%e currencie! %a! to /e paire$ to t%e US 8ollar@ %ence re!ultin in t%e *ajor currencie! /ein paire$" So*e o# t%o!e *ajor parin are lie t%e GBP'US8@ US8'.P+ an$ US8'EUR"  ;%o!e *ajor currencie! currencie! %aell >ell e!ta/li e!ta/li!%e !%e$ $ countrie! t%at %aell $ene$ econo*ic in#ra!tructure an$ rule!@ %ence >e can i$enti#1 t%e* a! co*paratie %a%ic% >e %a%ic% *a$e it !tart to $epreciate" Gie %a%ic >%ic% % can can i%ic% >e are a re !eein"  etoro  ;%e rea!on >%1 >e c%o!e t%i! !trate1 i! t%at@ >e are not o/lie$ to eJerci!e at t%e en$@ %ence i# t%e EUR >%ere to appreciate >e can eJerci!e an$ collect our prot" %ere a! i# it continue$ to $epreciate aain!t t%e US8 >e >ont eJerci!e@ an$ ju!t loo!e our pre*iu*" 3.% +*, *ayment Hedging !trategy For t%e !econ$ tran!action >e %aar$ contract in or$er to %e$e our po!iton" A#ter a !erie! o# anal1!i! an$ re!earc% >%ic% %aeen /ot% rate!" In or$er #or u! to pree %aar$ tran!action to uarantee a certain rate" A #or>ar$ contact >oul$ !et t%e rate >%ic% >e are !eein an$ a %a
 ;%e rea!on >%1 >e c%o!e t%e #or>ar$ contract #or t%i! pa1*ent@ i! #or t%e #act t%at >e can cu!to*i,e t%e contract to *eet our nee$@ in a$$ition to not pa1in a pre*iu*" oreoe can ine %aa1" Ba!e$ on t%e anal1!i! an$ re!earc% >%ic% >e %a #or>ar ar$ $ cont contra ract ct >oul >oul$ $ /e !uit !uita/ a/le le %ae %a$ to /e caut cautio iou! u!"" ;%at ;%at i! >%1 >%1 >e %a%ere a#ter all >e %ae$ t%e appreciation o# t%e GBP aain!t t%e US8@ %ence !uc% *oe eJecute t%e call option in or$er to o/tain prot out o# t%e tran!action" (Yahoo# $inan%e& 'GBP/USD uotes  *n+o'& 2,1)

Lie *entione$ *entione$ in t%e r!t pa1*ent t%o!e are t%e rea!on >%1 >e c%o!e t%e call option@ e!peciall1 >%ic% it! a lare a*ount" ;%e rea!on i! t%at >e are not o/lie$ to eJerci!e at t%e en$@ %ence i# t%e EUR >%ere to appreciate >e can eJerci!e an$ collect our prot" %ere a! i# it continue$ to $epreciate aain!t t%e US8 >e >ont eJerci!e@ eJerci!e@ an$ ju!t loo!e our pre*iu* 3.4 +*, *ayment Hedging !trategy For t%e !econ$ .P+ tran!action >e %a%ic% i! t%e #or>ar$ contract"  ;%at i! $ue to !a*e re!earc% an$ anal1!i! t%at >e %aeen t%e *oee %a$ to in!ure t%at >e pic a $ate >%ere t%e currenc1 pair i! at t%e pea@ in or$er to o into a #or>ar$ contract" ence oin into a #or>ar$ contract >ill proit% t%e DeJi/ilit1 !ince it! cu!to*i,a/le" 3.5 / *ayment Hedging !trategy For t%e la!t pa1*ent >e %aar$ contract in or$er to o/tain prot out o# t%e inDo> pa1*ent to /e *a$e to our account" ;%e 68 rate i! currentl1 currentl1 at it! %i%e!t e%1 >e $eci$e$ to enter into a #or>ar$ contract at t%e current rate !o t%at >e can uar uaran ante tee e our our c%an c%ance ce to *a ae e pro prot" t" enc ence e $ue $ue to t%e !li !li%t %t Ductua Ductuatio tion! n! t%at t%at /ot% /ot% curre currenci ncie! e! are are encoun encounter terin in@@ %ence %ence t%e enter enterpri pri!e !e !ecur !ecure! e! t%e a*ount a*ount t%e1 t%e1 >ill >ill recei recei
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4.0 Outlook and Research 4.1 2actors 2actors aecting the alue o$ the currency  ;%ere are !o *an1 #actor! t%at %a! a $irect i*pact on t%e *oa1! con!i$ere$ /1 anal1!t! a! one o# t%e *ain $etri*ent! o# %o> %ealt%1 i! t%e econo*ic !tatu! o# t%e countr1"  ;%e1 pla1 a *ajor role in $eter*inin $eter*inin t%e le%ic% >%ic% curre currenc1 nc1 i! %i%er %i%er %ence %ence %a%ic% currenc1 %a! t%e lo>er rate %ence %ae< o>eoul$ /e t%e Gree 8e/t Cri!i!@ an$ t%e i*pact it %a! on t%e entire European currenc1" 8ue to t%e continuou! /ail out t%at t%e1 are pa1in an$ t%e increa!e in t%e !ooul$ >oul$ /e t%e polic1 polic1 o# Huanti Huantitat tatier intere!t rate! an$ to create *ore *one1" %. *ul *ulic ic et et  ;%ere are are a lot o# nation leoul$ lie lie to con$uct@ an$ nee$ #un$in #un$in  %ence %ence one one o# t%e t%e *ain *ain !ourc !ource! e! #or #un$in #un$in >oul$ >oul$ /e t%rou% $e/t" ;%e purpo!e i*ple*entin !uc% project! i! to increa!e #orein ina! not a/le to pa1 /ac t%e $e/t@ it >ill !tart to print *ore *one1 >%ic% >ill cau!e inDation >%ic% >ill cau!e t%e currenc1 to $epreciate" A oo$ eJa*ple aain >oul$ /e t%e Gree $e/t cri!i!@ >%ere t%e countr1 $e#aulte$ #or t%eir ina/ilit1 to pa1 /ac t%eir $e/t!" 3. 6rade rade ala alance nce  ;ra$e  ;ra$e /alance i! *ea!ure$ /1 calculatin t%e $i9erence $i9erence /et>een t%e leei%! t%e eJport it >ill re!t in a tra$e $ecit" %en a countr1 #ace! tra$e $ecit! it *ean! t%at t%ere i! an outDo> o# $o*e!tic currenc1 to t%e #orein *aret!" A oo$ eJa*ple o#  tra$e $ecit i! >%at i! %appenin in t%e USA #or t%e pa!t #e> $eca$e! an$ t%at i! $ue to t%e US $ollar /ein %el$ /1 #orein countrie!" o>e%en t%e eJport! are *ore t%an t%e i*port! it! calle$ tra$e !urplu!" 4. ierent ierentials ials in )nation )nation88 )nterest )nterest Rates Rates Intere!t rate! all oorl$ are !et /1 central /an!@ t%e1 control intere!t rate! rate! to contr control ol inDat inDation ion rate" rate" For For in!tan in!tance ce i# t%e t%e inDat inDation ion >a! %i%@ %i%@ t%e intere!t rate et! increa!e$ /1 t%e CBB in or$er to $ecrea!e t%e le
inDation@ %ence increa!in t%e e can relate intere!t rate! to currenc1 /1 !tatin@ t%at t%e %i%er t%e intere!t rate@ t%e %i%er t%e
4.% #urrency (airing  4.2.1 USD  ;%e Unite$ State! 8ollar i! t%e *o!t $e*an$e$ currenc1 currenc1 in t%e FK *aret a*on!t all ot%er currencie!@ #or t%e #act t%at a! a currenc1 it can /e paire$ >it% al*o!t all ot%er *ajor currencie!@ in a$$ition to it /ein u!e$ a! a /enc%*ar /enc%*ar in t%e #oreJ *aret" US8 a! a currenc1 i! %el$ /1 *o!t central /an! aroun$ t%e >orl$@ #or it i! rear$e$ rear$e$ a! t%e national re!erit% a couple o# currencie! !uc% a! t%e Ba%raini 8inar@ Matari Ri1al an$ .or$anian 8inar" -rading E%onoies& 'United States Doar'& 2,1)

3.2.2 EUR/USD (Euro against 1 USD)  ;%e Euro an$ t%e 8ollar repre!ent! repre!ent! t%e >orl$! lare!t econo*ie!" Bot% currencie! t%rou% t%e 1ear! %aitne!!e$ !u/!tantial %at %a! %appene$ in t%e pa!t #ro* t%e tec% /oo*@ to t%e A*erican *ortae cri!i! to t%e European $e/t cri!i!@ t%o!e t>o currencie! >%ere a/le to >it%!tan$ %i% le in e
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 ;%e a/oe! t%e currenc1 currenc1 *oe can !ee !ee t%at t%e t%e t%e euro euro lo!t *ore *ore t%an ) aain!t t%e t%e US8" Since t%e t%e /ei /einn nnin in  o# a1 a1 20)0 20)0 an$ an$ o o /et>ee een n US8'EUR 0"(37 an$ US8'EUR 0"7534" 8urin t%o!e Ductuation! t%e Euro >a! a/le to reac% to it! %i%e!t point at 0"(37@ >%en t%e Euro appreciate$ aain!t t%e US8" o>eent /ac to $epreciatin $epreciatin aain aain!t t%e 8ollar@ reac%in it! lo>e!t poin pointt 0"47 0"474) 4) /1 t%e en$ en$ o# Apri Aprill 20)) 20))"" ;%e ;%e tren tren$ $ o# Ductu Ductuat atin in  cont contin inue ue$ $ t%rou%out t%rou%out t%e 1ear! >%ere it >ent /et>een US8'EUR 0"7(03 an$ US8'EUR 0"75&(" In 20)5 20)5 t%e Euro Euro contin continue$ ue$ to appr appreci eciate ate aain! aain!tt t%e t%e $olla $ollarr reac% reac%in in 0"(077 0"(077"" o>eit% all >%at i! %appenin in t%e econo*1 an$ t%e ne>! re!earc%e$ t%e currenc1 i! appeare$ to $epreciate aain!t t%e 8ollar reac%in to a US8'EUR)"2)@ t%an! to t%e Uraine an$ t%e Greece cri!i!"

 4.2.3 GBP/USD GBP/USD (British Pound Pound against 1 USD)  ;%e Great Briti!% poun$ i! reDecte$ a*on!t t%e >orl$! ol$e!t currencie! currencie! in ter* o# circulation up to t%i! $ate" ;o tra$er! an$ eit% t%e US8@ Euro an$ .apane!e +en" 8ue to Lon$on! location an$ t%e %i% orl$" (Yahoo# $inan%e& 'GBP/USD uotes  *n+o'& 2,1)

Anot%er rea!on t%at #a%ic% i! t%e Doatin rate!" ;%i! !1!te* #acilitate! #or tra$er! to /u1 an$ !ell t%e GBP in o9!%ore /an!"  ;%e t%ir$ rea!on #or t%e %i% $e*an$ #or t%e GBP@ i! $ue to t%e currenc1 currenc1 #ace! #ace! a lot o# eJtr eJtre*e e*e an$ !%arp !%arp Ductua Ductuatio tion!" n!" ;%o!e ;%o!e eJtr eJtre*e e*e Ductu Ductuati ation! on! are are attracti
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re!e*/le! t%i! !%aine!! i! t%e Ductuation! t%at %a! al>a1! /een t%e ca!e in t%e GBP"  ;%e GBP'US8 currenc1 currenc1 pairin i! al>a1! re#erre$ to a! ca/le t%i! ca/le currenc1 currenc1 i! t%e %i%l1 tra$e$ currenc1 currenc1 in t%e *aret" *aret" ;%e #ollo>in rea!on rea!on i! one o# t%e *o!t %1 t%e a/o
Bot% parin are
 ;%e a/oa! $epreciatin $epreciatin aai!nt t%e GBPuntil GBPuntil t%e en$ o# a1" a1" %ere a#ter>ar$!@ it ept on appreciatin aain!t t%e GBP@ >it% Ductuation! o# t%e cro!! rate >%ere it neent /loe> )"&000 $urin t%e #ollo>in 5 1ear!" a%ere it reac%e$ it! lo>e!t in t%e /einnin o# April 20)& at )"57)& >it% a !li%t !li%t increa!e$ increa!e$ #ollo>e$ /1 t%e t%e !econ$ >ee o# april" Ba!e$ Ba!e$ on t%e t%e #oll #ollo> o>in in  ue uerre! t%at t%at >re >re o/ta o/tain ine$ e$ #ro* #ro* t%e t%e rap rap%@ %@ >e can can %aill /e #acin ! !erie! o# Ductiation! $urin t%i! 1ear@ >it% a %i% $erpreciation co*pare$ to t%e pre
 4.2.4 USD/JPY USD/JPY (Yen (Yen against 1 USD) USD)  ;%e .apane!e 1en i! tra$e$ in lare or$! t%e t%ir$ *o!t tra$e$ currenc1 in t%e >orl$" Since t%e +en %a! relati intere!t 11 & P a  e

rate!@ %ence /ot% t%e US8 an$ AU8 u!e! it in carr1 tra$e!" ;%i! !trate1 i! !ellin curr currenc encie! ie! >it% >it% lo> inter intere!t e!t rate! rate! in or$er or$er to purc% purc%a!e a!e curre currenc1 nc1 >it% >it% a %i%e %i%err intere!t rate!"  .apan #or 1ear! 1ear! %a%ic% t%e1 >ere %tin %tin to et out o#" ;%e1 trie$ to intro$uce re#or*! t%at /acre$ an$ %a$ a neatia! intro$uce intro$uce Muantitatia! t%e lare!t %ol$er o# A*erican trea!ur1 trea!ur1 /ill!@ until t%e1 >ere replace$ /1 c%ina" ;%e1 al>a1! eep t%eir currencie! lo>er t%an t%e US8 #or tra$e purpo! purpo!e!@ e!@ %o>eea! >a! not t%e ca!e ca!e !ince !ince .apane .apane!e !e co*pan co*panie! ie! !tarte !tarte$ $ to out!ource #or c%eaper in t%e countrie! it!el#"

Ba!e$ on t%e a/oe can $e$uce t%at t%e rate re*aine$ a/oa! Ductuatin #ro* t%e 1ear 200 to 20)0 /et>een t%e #ollo>in rate! o# US8'.P+ (4"42 an$ US8'.P+ 5"&5"  ;%e .apane!e 1en !tarte$ to $epreciate $epreciate aain!t t%e US 8ollar in t%e en$ o# .une reac%in to it! lo>e!t point >%ic% US8'.P+ 7&"3 on =cto/er 20))" Startin #ro* t%e en$ o# Fe/ruar1 20)2@ t%e +en !tart to appreciate !%arpl1 aain!t t%e US8 reac%in US8'.P+ 3"43" ;%i! !%arp increa!e continue$ until t%e *i$ o# a1 reac%in US8'.P+ )02")5" En to tra$e %eait% one anot%er"

1% & P a  e

 4.2. USD/!"D USD/!"D (!"D (!"D against 1 USD)  ;%e 6u>aiti 8inar con!i$ere$ con!i$ere$ to /e to /e t%e %i%e!t %ic% i! >ort% clo!e to 3"&&" It i! t%e onl1 $inar currenc1 >%ic% i! $iaiti l!" ;%e currenc1 i! *o!tl1 a9ecte$ /1 t%e %i% oil reait pro$uce!" %ere 6u>ait %a! )0 o# t%e >orl$! cru$e oil >%ic% earn! t%e countrie! *ore t%an 7& o# it! earnin!" ;%e %i% aiti $inar al!o iait a %i% purc%a!in po>er #or i*portin aricultural pro$uct! t%at 6u>ait lac! to %a
 ;%e a/oit% a rate rate o#  0"2(73 until t%e en$ o# auu!t 20)) >it% a rate reac%in it! lo>e!t at 0"2720 arain!t t%e $ollar" o>eit% t%e rate eac%in o# 0"2()&" a#ter>ar$!@ t%e 68 68 !trate$ to $r*aticl1 $r*aticl1 appreciat appreciate e till t%i! $a1 aai!nt aai!nt t%e US8 rec%in rec%in at it! %i%e!t rate! >itne!!e$ $urin t%e la!t & 1ear! at a !pot rate o# 0"3022 in to$a1!" /a!e$ on t%e #ollo>in uere! t%at >re o/taine$ #ro* t%e rap%@ >e can %aill re*ain !ta/le >it% a !li%t appreciation co*pare$ to t%e pre
4.3 6echnical 'nalysis It i! ill ena/le %i* to *ae $eci!ion! t%at >ill 1iel 1iel$ $ t%e* t%e* pro prot" t" enc ence e ;ec%n ec%nic ical al anal anal1! 1!i! i! i! a *et% *et%o$ o$ o# pre$ pre$ic icti tin n pric price e *o
 ;%i! anal1!i! tae! into con!i$eration con!i$eration >%at actuall1 %appene$ in t%e *aret@ rat%er tain >%at !%oul$ %ain #ollo>in t%ree t%ree point!? point!? • • •

aret action $i!count! e
 ;ra$er!  ;ra$er! $epen$ on price c%art!@ ill %elp tra$er! *ae $eci!ion on >%en are t%e entr1 an$ eJi!t point o# tra$e@ in a$$ition to /e a/le to pre$ict tren$! an$ t%e !trent% an$ !uita/ilit1" It %elp! t%e inant a !%ort or lon po!ition" In ot%er >or$ >or$! ! #or eJa* eJa*ple ple i# t%e inill c%oo!e a lon a po!ition"  ;%ere are are *an1 tec%nical tec%nical in$icator! in$icator! t1pe! t%at t%at are /ein utili,e$ !uc% !uc% a!? • • • • •

 ;ren$  ;ren$ Strent% :olatilit1 C1cle o*entu*

5.0 Evaluation Ba!e$ on t%e *aret re!earc% an$ t%e !trateie! c%o!en@ to %e$e our po!ition aain!t currenc1 eJc%ane Ductuation!" Ba!e$ on t%e Pa1*ent !c%e$ule t%at t%at t%e enterpri!e %a! to *ae in t%e /elo> ta/le ate

3)'3')& ))'5')& )2'&')& 2&'&')& )'4')&

#urren cy US8 EUR .P+ GBP .P+ 68

'mount 7@7&0@000 54&@000 )@&00@000 00@000 ))@0000@000 )7&@000

Ca!% a =utDo> =utDo> =utDo> InDo>

e create$ 5 !trateie! t%at are aline$ >it% t%e account! pa1a/le an$ recei pa1*ent"

14 & P a  e

 ;%e ;a/le a/o! an$ inDo>! t%at %a! to /e *a$e"

&") Calculation! In t%i! !ection >e are oin to %i%li%t t%e $etaile$ calculation! t%at >%ere per#or*e$ #or eac% !trate1 in or$er #or u! to $eri
&"2 e$in Strate1 &"2") Euro Pa1*ent e$in Strate1 Calculation!  ;%e pa1*ent pa1*ent %a! to /e *a$e *a$e on t%e 3)!t o# arc%@ %ence to %e$e t%e enterpri!e po!ition aain!t t%e Ductuation!@ >e %a
=ption NAt t%e one1O" $irst Ste5 Buing the 0a otion

)" Co!t o# =ption =ption Pa1*ent Pa1*ent A*ount A*ount J Pre*iu* Pre*iu* J Spot aret aret Rate Rate Co!t o# t%e option  EUR 54&@000 J 0"025) J )")202 #ost o$ the o%tions & USD 12'3.213 Se%ond Ste5 E6er%ising the otion to a o7igation 2" EJerci!in EJerci!in t%e t%e option option  Pa1*ent Pa1*ent A*ount A*ount J Strie Price EJerci!in t%e =ption  EUR 54&@000 J )"0&& Eerising the *%tion & 4+,'- -hird Ste5 8ount Re9uired 3" ;otal =ption =ption Co!t  =ption Co!t Co!t Q EJerci!e EJerci!e t%e t%e =ption  ;otal  ;otal =ption Co!t  )2@&&3"&2)3 )2@&&3"&2)3 Q 50@&7& ota *%tion #ost & USD ,3'120.213 $ourth Ste5 Pro:t ;ade +ro E6er%ising the tion

15 & P a  e

5" Prot  A*ount A*ount ReHuire$ ReHuire$ – En$in En$in A*ount A*ount ReHuire$ ReHuire$ Prot  US8 &0&@&5"&00 - US8 &03@)2("&2) Prot & USD 2'4.+-+

&"2"2 .P+ Fir!t Pa1*ent e$in Strate1 Calculation! For t%e Secon$ pa1*ent %a! to *a$e on t%e )) t% o# April@ *oreoe /elie
%e$in tool >oul$ /e a For>ar$ contract"

$irst Ste5 %on
)" A*ount reHuire$ reHuire$ in US8  Pa1*ent Pa1*ent A*ount A*ount J Spot Bi$ Rate A*ount ReHuire$ in US8  .P+ )@&00@000 J )')20"(4  ount Re5uired Re5uired in USD & USD USD 12'411.,4 12'411.,4 Se%ond Ste5 0a%uate the $or=ard Rate

2" For>ar For>ar$ $ rate  Spot rate rate - Bi$ Bi$ Point Point')00 ')00 For>ar$ Rate  )2)"55 – 33"00')00 6or7ard Rate & 121.1,1 -he $"D Points are su7tra%ted 7e%ause the 7id > as? oint.

-hird Ste5 0a%uate the re9uired 8ount

3" ReHuire$ ReHuire$ A*ount A*ount  Pa1*ent Pa1*ent A*ount A*ount ' =ne =ne ont% For>ar$ For>ar$ Rate ReHuire$ A*ount  .P+ )@&00@000 ' )2)")0) Re5uired ount & USD 12'30.3 $ourth Ste5 $ourth Ste5 Pro:t ;ade +ro E6er%ising the $or=ard 0ontra%t 0ontra%t

5" Prot  A*ount A*ount ReHuire$ ReHuire$ – En$in En$in A*ount A*ount ReHuire$ ReHuire$ Prot  US8 )2@5))"0&5 - US8 )2@3(4"3&& Prot & USD 24.++

&"2"3 GBP Pa1*ent e$in Strate1 Calculation!  ;%e pa1*ent pa1*ent %a! to /e *a$e *a$e on t%e )2t% o# a1@ %ence to %e$e t%e enterpri!e po!ition aain!t t%e Ductuation!@ >e %a
$irst Ste5 Buing the 0a otion

)" Co!t o# =ption =ption Pa1*ent Pa1*ent A*ount A*ount J Pre*iu* Pre*iu* J Spot aret aret Rate Rate Co!t o# t%e option  GBP 00@000 J 0"022) J )"5()( #ost o$ the o%tions & USD 2+'4-3.,,2 Se%ond Ste5 E6er%ising the otion to a o7igation 2" EJerci!in EJerci!in t%e t%e option option  Pa1*ent Pa1*ent A*ount A*ount J Strie Price EJerci!in t%e =ption  GBP 00@000 J )"570& Eerising the *%tion & USD 1'323'4,.,, -hird Ste5 8ount Re9uired 3" ;otal =ption =ption Co!t  =ption Co!t Co!t Q EJerci!e EJerci!e t%e t%e =ption  ;otal  ;otal =ption Co!t  US8 2@573"002Q US8 )@323@5&0"00 ota *%tion #ost & USD 1'32'+23.,,2 $ourth Ste5 Pro:t ;ade +ro E6er%ising the tion 5" Prot  A*ount A*ount ReHuire$ ReHuire$ – En$in En$in A*ount A*ount ReHuire$ ReHuire$ Prot  US8 )@3(5@&)&"00 - US8 )@3&2@23"002 Prot & 31'+2.,,

&"2"5 .P+ !econ$ Pa1 Pa1*ent *ent Strate1 Calculation! For t%e Secon$ pa1*ent #or t%e .apane!e 1en@ >e al!o %ait% t%e #or>ar #or>ar$ $ contr contract act"" Since Since >e are are re#er re#errin rin  to t%e !a*e !a*e re!ea re!earc rc% % t%at t%at >e %a
$irst Ste5 %on
)" A*ount reHuire$ reHuire$ in US8  Pa1*ent Pa1*ent A*ount A*ount J Spot Bi$ Rate A*ount ReHuire$ in US8  .P+ ))@000@000 J )')20")5 17 & P a  e

 ount Re5uired Re5uired in USD & USD USD +1'+.04+1'+.04Se%ond Ste5 0a%uate the $or=ard Rate

2" For>ar For>ar$ $ rate  Spot rate rate - Bi$ Bi$ Point Point')00 ')00 For>ar$ Rate  ))"35 Q &"(33')00 6or7ard Rate & 11+.3+033 -he $"D Points are added 7e%ause the 7id @ as? oint.

-hird Ste5 0a%uate the re9uired 8ount

3" ReHuire$ ReHuire$ A*ount A*ount  Pa1*ent Pa1*ent A*ount A*ount ' =ne =ne ont% For>ar$ For>ar$ Rate ReHuire$ A*ount  .P+ ))@000@000 ' ))"3(33 Re5uired ount & USD +2'120.+2 $ourth Ste5 $ourth Ste5 Pro:t ;ade +ro E6er%ising the $or=ard 0ontra%t 0ontra%t

5" Prot  A*ount A*ount ReHuire$ ReHuire$ – En$in En$in A*ount A*ount ReHuire$ ReHuire$ Prot  US8 )@&"(57 - US8 2@)2("&2 Prot & USD (0.-4)

&"2"& 68 Pa1*ent Receie %aar$ *aret"

$irst Ste5 0a%uate the $or=ard Rate •

For>ar$ rate  Spot rate - Bi$ Point')0@000 For>ar$ Rate  0"30) Q )0')0@000 6or7ard Rate & ,.3,2+ -he $"D Points are su7tra%ted 7e%ause the 7id @ as? oint.

-hird Ste5 0a%uate the re9uired 8ount •

ReHuire$ A*ount  Receiar$ Rate ReHuire$ A*ount  68 )7&@000 ' 0"302 Re5uired ount & USD --'-40.432

19 & P a  e

&"3 Iner co!t! t%an

tra$itional /an!" oreoer t%e1 o9er /etter rate! #or t%e cu!to*er!" Anot%er rea!on >%1 >e c%o!e U/an i! #or t%e rea!on t%at t%e1 %a%ic% i! eHui
&"3") ;%e In
In or$er to calulcate %o> *uc% prot >e are in to enerate #ro* e*terin into one1 aret@ >e %ain #or*ula? • • •

Prot  Prinicpal J u*/er o# 8a1! J ;er* 8epo!it ' 340)00 Prot   50@&7& J 30 J 0"023& ' 340 J )00 Prot  "407)

&"3"2 ;%e in
In or$er to calulcate %o> *uc% prot >e are in to enerate #ro* e*terin into one1 aret@ >e %ain #or*ula? • • •

Prot  Prinicpal J u*/er o# 8a1! J ;er* 8epo!it ' 340)00 Prot   )2@3(4 J 30 J 0"023& ' 340 J )00 Prot  0"2524

&"3"3 ;%e in
1" & P a  e

In or$er to calulcate %o> *uc% prot >e are in to enerate #ro* e*terin into one1 aret@ >e %ain #or*ula? • • •

Prot  Prinicpal J u*/er o# 8a1! J ;er* 8epo!it ' 340J)00 Prot   )@323@5&0 J 40 J 0"023& ' 340 J )00 Prot  &)"(3&)

&"3"5 ;%e in
In or$er to calulcate %o> *uc% prot >e are in to enerate #ro* e*terin into one1 aret@ >e %ain #or*ula? • • •

Prot  Prinicpal J u*/er o# 8a1! J ;er* 8epo!it ' 340J)00 Prot   2@57"(4 J 40 J 0"023& ' 340 J )00 Prot  3"422(

4"0 Sue!tion!  ;%ere are *an1 !ue!tion! !ue!tion! t%at >oul$ %elp i*prooul$ i on >%ic% currencie! !%oul$ >e pair #or ar/itrae opportunitie!" Anot%er !ue!tion >oul$ /e to inoul$ %elp t%e co*pan1 to *ae e9ort le!! prot in!tea$ o# %a $a1! one! !%oul$ /e con$ucte$ >it% /an! >%o o9er %i% intere!t rate! in or$er to *ae oo$ prot out o# !uc% !%ort perio$ $epo!it" It i! al!o !ue!te$ #or t%e co*pan1 to /orro> a !u/!tantial a*ount at a lo> rate an$ ine %aa! $ue to u! c%oo!in a >ron $ate or price@ a !ue!tion i# >e %a$ t%e opportunit1 to $o it aain in t%e #uture!@ i! %a
%0 & P a  e

 ;%ere are are !o *an1 inee $eci$e$ to o >it% t%e inill !ill 1iel$ #or u!e t%e eJpecte$ prot t%at >e >ere %opin #or"

7"0 Su**ar1 an$ Conclu!ion  ;%ere are !o *an1 rea!on! an$ #actor! t%at can cau!e a co*pan1 to lo!e it! *one1" *one1" E!peciall1 >%en it co*e! to >antin to enerate *ore *one1 to /oo!t t%eir po!ition@ e!peciall1 >%en t%e1 >ant to protect t%e*!ele %i%li%te$ t%e $i9erent *et%o$! a co*pan1 can un$ertae to protect t%e*!el tran!action! an$ one inDo> to /e *a$e *a$e #ro* #ro* t%ei t%eirr acco accoun untt >%ic >%ic% % !too !too$ $ >it% >it% a*ou a*ount nt o# 7@7 7@7&0 &0@0 @000 00"" ;%e! ;%e!e e tran!action! %a$ to /e *a$e >it% $i9erent currencie!@ >%ere a !erie! o# %e$in !trateie! %a pa1*ent!" ;%e #or>ar$ tran!action %ao EUR@ GBP" A#ter t%e eJecution eJecution o#  all tran!action! an$ t%e co*pletion o# all outDo> an$ inDo> pa1*ent!@ >e %a%ic% totale$ up 4@347@)()"4"

Re#erence! •

•

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i!torical EJc%ane Rate!  =A8A" n"$"" Retrie>>"oan$a"co*'currenc1'%i!torical-rate!' i!torical EJc%ane Rate!  =A8A" n"$"" Retrie>>"oan$a"co*'currenc1'%i!torical-rate!' Euro FK =ption A*erican Muote! Glo/eJ" n"$"" Retrie>>"c*eroup"co*'tra$in'#J')0'euro#JTHuote!Tlo/eJToption!"%t*loptionEJpiration40-6&  ;%e E9ect! =# =# Currenc1 Currenc1 Fluctuation! Fluctuation! =n ;%e ;%e Econo*1" Econo*1" 20)3@ Auu!t Auu!t 4" Retrie>>"in
%1 & P a  e

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Un$er!tan$in t%e I*pact o# Currenc1" n"$"" Retrie>>"u/an"co*"au'ter*-$epo!it! Unite$ State! 8ollar  )47-20)&  8ata  C%art  Calen$ar  Foreca!t" n"$"" Retr etrie< ie>>"tra$inecono*ic!"co*'unite$!tate!'currenc1 ForeJ ;utorial? ;ec%nical Anal1!i! W ;ec%nicaI In$icator!  In>>"in!@ an$ tool!" n"$"" Retrie>>"Je"co*'currenc1'jp1-japane!e-1en  ;er*  ;er* $epo!it!" n"$"" Retrie>>"*one1!*art"o<"au'in
Appen$ice! •

EUR'US8 !pot price 2(t% o# arc%

%% & P a  e

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EUR'US8 !pot price call option *arc% ) !t

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GBP'US8 !pot price 30t% o# April

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GBP'US8 !pot price call option *arc% 2) !t

%3 & P a  e

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68'US8 !pot rate )!t o# a1 @ 20)&

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US8'.P+ !pot rate 2&t% April 20)&

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US8'.P+ !port rate &t% o# a1 20)&

%4 & P a  e

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68'US8 ) *ont% #or>ar$ rate

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US8'.P+ ) *ont% #or>ar$ rate

%5 & P a  e

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US8'EUR

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GBP'US8

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US8'.P+

% & P a  e

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US8'68

A*erican option at t%e *one1

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UBan ;er* 8epo!it 8epo !it

%7 & P a  e

%9 & P a  e