Currency Management Question

CFA Level III
#1

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.

Thanks!

#2

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.

#3

Thanks!

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

#4

My pleasure.

PIMCO departures?

#5

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

#6

Got it.

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