## (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?

STATUS