1. Consider a large Australian cotton farmer who has just planted her crop. Once grown, she plans to export her production to China: Suppose the Australian cotton farmer goes short on a cotton no. 2 futures contract on the ICE exchange. Go to theice.com and look up the contract. What is the contract size? Is the contract settled with physical delivery or cashsettlement? 2. What is the role of the exchangeand clearinghouse in futures and options market?

For a U.S. trader working in American quotes, if the forward price is higher than the spot price: a. The currency is trading at a premium in the forward market. O b. The currency is trading at a discount in the forward market. O. Then you should buy at the spot, hold on to it and sell at the forward it's a built-in arbitrage. I on O d. All of the above it really depends if you're talking American or European quotes.

Assume you can exchange $1 for either £1.0 or €0.50 in the U.S. In the London market, you can exchange £1 for €0.52. This situation creates an opportunity to profit immediately from which one of the following?  A.  Futures arbitrage   B.  Currency hedge   C.  Interest rate swap   D.  Absolute purchasing power parity   E.  Triangle arbitrage

HSL Inc., a U.S.-based MNC, imports goods from Canada, and HSL Inc. records its payables in Canadian dollars. If the Canadian dollar will appreciate in the near future, you would _______. I. purchase Canadian dollars forward II. purchase Canadian dollar futures contracts III. purchase Canadian dollar put options IV. purchase Canadian dollar call options A. III, IV B. II, III C. I, II, IV D. I, II

To hedge payables, the firm will purchase a currency call option on the payable foreign currency. The firm can use the call option to buy foreign currency at a specified price. Why should the company, in this case, purchase a call option than a Forward contract? Maybe to make it easy on me, you can illustrate the answer by highlighting the situations suitable for options and Forward contracts. For example, "when this situation occurs....., then that hedging we should use .... because of XYZ reasons/effects on profitability".

Suppose that a French firm would like to have its stock available through an American Depository Receipt (ADR). If the firm’s stock is currently selling for €75 and that the exchange rate between the € and the $ is €1.0=$1.0592. What price should we expect for the ADR in US dollars? Suppose that over the next year the dollar reaches parity with the Euro, i.e., $1.00=€1.00 and that the price of the French firm’s stock rises to €100. What would expect the price of the ADR to be?

How do I backdate settlement prices on the Chicago Mercantile Exchange? Or is there another exchange that allows you to backdate settlement prices? Also, how do you calculate the cumulative gain closing out a market to market position on long contracts?

Doug Bernard specializes in cross-rate arbitrage. He notices the following quotes: Swiss franc/dollar = SFr1.5971/$ Australian dollar/U.S. dollar = A$1.8215/$ Australian dollar/Swiss franc = A$1.1440/SFr Ignoring transaction costs, does Doug Bernard have an arbitrage opportunity based on these quotes? If there is an arbitrage opportunity, what steps would he take to make an arbitrage profit, and how much would he profit if he has $1,000,000 available for this purpose? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Arbitrage profit

Which of the following best describes the terms 'long forward position' and 'short forward position' in foreign exchange trading?   A short forward position is holding a currency for a short duration, while a long forward position is holding it for a longer period.   A short forward position means you have agreed to sell a currency in the future, while a long forward position means you have agreed to buy it in the future.   A long forward position is when you expect the currency's future spot rate to decrease, and a short forward position is when you expect it to increase.   A long forward position means you have agreed to sell a currency in the future, and a short forward position means you have agreed to buy it in the future.

An e-commerce company based in the United Kingdom is planning to launch a new market in Australia and is concerned about potential volatility in the Australian dollar. Which hedging strategy(s) would be suitable to manage the currency risk in this scenario? Choose all that apply. Purchasing a call option on the Australian dollar Selling Australian dollars forward against the British pound Purchasing a put option on the Australian dollar