(Solution Document) Export Bank has a trading position in Japanese Yen and Swiss Francs. At the close of business on February 4, the bank had 300,000,000 and...


Export Bank has a trading position in Japanese Yen and Swiss Francs. At the close of business on February 4, the bank had ¥300,000,000 and Sf10,000,000. The exchange rates for the most recent six days are given below:

 

        Exchange Rates per U.S. Dollar at the Close of Business

                                    2/4         2/3         2/2         2/1         1/29       1/28

        Japanese Yen   112.13   112.84   112.14   115.05   116.35   116.32

        Swiss Francs   1.4140   1.4175   1.4133   1.4217   1.4157   1.4123


     c.  What is the sensitivity of each FX position; that is, what is the value of delta for each currency on February 4?

 

        Japanese Yen:   1.01 x current exchange rate   = 1.01 x ¥112.13 = ¥113.2513/$

                                   Revalued position in $s          = ¥300,000,000/113.2513 = $2,648,976.21

                                   Delta of $ position to Yen      = $2,648,976.21 - $2,675,465.98

                                                                                   = -$26,489.77

 

        Swiss Francs:    1.01 x current exchange rate   = 1.01 x Swf1.414 = Swf1.42814

                                   Revalued position in $s          = Swf10,000,000/1.42814 = $7,002,114.64

                                   Delta of $ position to Swf      = $7,002,114.64 - $7,072,135.78

                                                                                   = -$70,021.14


In the answer why 1.01 would be multiplied? where is the 1.01 from?

 







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