The $ portfolio manager wants €1B. eu bond market but avoid translation risk and considering options, Qn is about option to “hedge with futures contracts”
data:
spot: $1.30/€
euro futures contract
contract size €125,000
contract price: $1.28/€
expiration in nine months
qn: calculate the number of contracts required to initiate the strategy
i am not sure if the hedge ratio should be 1.0 especially given the difference between futures and spot prices. Can some1 pls help