Taken from morning session 2008- Evaluate credit risk
- Redriver shorts a two year forward contract on JPY denomininated in ZAR at 15.00 JPY/ZAR forward rate
- Forward expires today
- Exchange rate was 14.5 JPY/ZAR when Redriver entered the contract
- Spot (current) rate is now 17.50 JPY/ZAR
- Compound annual interest rate for the two year period : 1% in JPY and 10% in ZAR
Which of the part bears the credit risk and why?