Q= You own a local coffee house in the northeast part of Lincoln, NE and you

import coffee from Vietnam, the second-largest coffee producer in the world.
The invoice is priced in the Vietnamese currency, dong. You would like to
hedge your payables but there are no future contracts or currency options for
the dong. Explain how you would hedge the dong payables including any
assumptions you are making?

The only option available is to approach a bank  in the home country that has nostro account
with a bank in Vietnam.

So, the bank that has nostro account with another bank has to be identified  and approached
for carrying out future contracts or currency options.

It may so happen that none of the banks in USA have  direct nostro account with any  bank in
Vietnam. In that case, a bank in USA can approach any other bank say Bank of England  in
UK  , which has nostro account with bank of Vietnam, to open account with them. The Bank
of England will be known as facilitator bank.  The facilitator bank with its clearing network
will carry out necessary  foreign exchange transaction.

The mode of operation will be a local bank in USA will set up dong account on their behalf.
For this the local bank of USA will  open a nostro account  with a facilitator bank  with a
physical presence in Vietnam or a  local bank of USA will hold account in local Vietnam
bank in the local currency i.e., dong.

On  the settlement date, Vietnam bank will deliver dollar  to nostro account of USA bank and
USA bank will pay in dong to the local Vietnam bank where the Bank of USA  holds
account.