Answer a) Under the plight to produce cancelment of 50,000 GBP after a year from now, we scarcity to suborn GBP from Forex bargain on forward objurgate . The modify objurgate destroy mingle in the occurrence , the destroy of modify objurgate can be hedge by interpretation of liberty contract.
we can hedge the destroy by
Answer b) Strike figure of Seduce/put liberty (X) = 1.15 USD
Premium (P) = 0.01
Number of reduce = 50,000
Pay impromptu from Long seduce liberty / concise Put liberty= Max ( S-X,0)
Benefit from Long seduce liberty / concise Put liberty = [Max ( S-X,0) – P] * Number of reduce.
|State||Spot Figure(S)||Premium(P)||Strike Figure(X)||Number of reduce||Payimpromptu (S-X)||Benefit =Payoff-P||Total Benefit (USD)|