Currency Management Question

I struggled big time with this chapter. Not the methods, but just any part where math was needed.

A trade enters a short 3-month non-deliverable forward on 2,000,000 CNY at CNY/USD 6.1155. At the end of the period, the spot exchange rate is USD/CNY 0.1612. The trader’s gian or loss is closest to:

USD ________ Gain/Loss.

So he shorts the forward, so he wants CNY to go down in value. Which is does. Can someone please explain how they think through this question. It has helpedm e to always remember to put a (1) next to the denominator currency.


So, he’s paying CNY2,000,000 × USD/CNY 0.1612 = USD322,400.00 in the spot market and receiving CNY2,000,000 ÷ CNY/USD 6.1155 = USD327,037.85 on the forward, for a profit of USD4,637.85.


BTW - All of these PIMCO departures this past year has been killing me at work!

My pleasure.

PIMCO departures?

Mohamed A. El-Erian, Bill Gross, Departure and return of Seidner and Saumil Parikh’s departure last week…

PM’s for several of my client’s fixed income mandates

Got it.

I’m pretty sure that they’re not my fault.