Reporte

Nombre: Matrícula:
Vanessa Huitz Montero Al02777419
Nombre del curso: Nombre del profesor:
Finanzas Internacionales. Andrea Josefina Pintor Perez
Guerrero.
Módulo: Actividad:
Module 3. Actividad 15.
Fecha: 03 de mayo del 2023.
Bibliografía:
 MonederoSmart. (2021). Contratos de ocpiones: que son, ventajas,
usos y mas. Recuperado de:
https://www.monederosmart.com/contratos-de-opciones/.
 Esan. (2022). Contratos forward: ¿Cuales son sus beneficios?.
Recuperado de: https://www.esan.edu.pe/conexion-esan/contratos-
forward-cuales-son-sus-riesgos-y-beneficios#:~:text=Ventajas%20de
%20un%20contrato%20forward&text=Ofrecen%20una%20gran
%20flexibilidad%20dado,lo%20cual%20limita%20eventuales
%20pérdidas.

ACTIVITY 15. HEDGING RECEIVABLES STRATEGIES.

Instructions:

Imagine a Mexican company has accounts receivable in dollars with an expiration

date in 24 months (about 2 years) for an equivalent of 800,000 dollars.

Due to the exchange rate fluctuation of the Mexican peso against the dollar, the
financial manager decides to hedge against the exchange rate, so he asks for your
advice and needs you to answer the following:  

1. Which hedging options does he have? Justify your answer. 

 Forward contract: In this case what we want is to hedge the risk

caused by the appreciation of the domestic currency against the
foreign currency because then the foreign currency will be worth less
and when trying to change it we will receive less money, when
making a forward contract we already set a exchange rate since the
beginning.
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 Future contracts: In this kind of contracts you can also set an

exchange rate by buying contracts at a specific price through the
Sistema Electronico de Negociacion in an specific date of expiration,
but the difference is that you have to take the short position (sell as
fast as possible) in order to eliminate the risk caused by the
appreciation of the domestic currency.
 Option contracts: This type of contract grants the seller or buyer the
right to buy or sell an asset at a previously established price, but not
the obligation. If you think the sale benefits you, take it, and if you
don't, leave it, but in order to be able to acces to this benefits you
have to pay a premium.

2. If the forward exchange rate offered by a financial institution is $20.15

MXP/USD, how much would the company be receiving in 24 months
(about 2 years)? 

USD 800,000 * 20.15 MXP = 16,120,000.

In 24 months upon the termination of the contract the company will receive
16,120,000 pesos.

3. According to the Sistema Electrónico de Negociación of MexDer, the

exchange rate upon the expiration date (settlement price) is $21.75
MXP/USD, how much would the company receive upon the expiration
date?

Considering that in MexDer the contract size of the futures in USD is traded
in blocks of 10,000 dollars, the company will buy 80 future contracts.

USD 10,000 * 80 * 21.75 MXP = 17,400,000 pesos.

So by the termination of the contract the company will receive 17,400,000

pesos MXN.

4. If the size of the options and futures contract on U.S. dollar is traded in
blocks of 10,000 dollars, the strike price is $20.10 MXP/USD and the
premium is 0.07 pesos per dollar, what type of hedging receivable
would you recommend the Chief Financial Officer of the company to
choose? Justify your answer.

Future contract: USD 10,000 * 80 * 20.10 = 16,080,000 pesos.

Option contract: 16,080,000 pesos + 56,000 pesos premium.

In this case i would not recommend a future contract because they

recommend to take a future contract if the operation is going to take in
the short term in order to hedge the risks of the appreciation of the local
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currency, in this case we want a 2 years contract wich is taken in the

long term, so I will recommend an option contract, in this way we can see
how the exchange rates move over time, and make a decision when the
time comes, because in this way we have the right but not the obligation
to make use of the contract. In addition, in the event that the buyer
decides not to continue with the purchase because we have an insured
premium, then we do not lose either.

5. Conclusion about the most convenient type of hedging (at least two
strategies) for your client. Justify your answer. 

It is a bit difficult to choose an option, because within the forward contracts,

you already have insured how much you are going to receive regardless of the
exchange rate, option contracts could be an option because they have the
advantage that during the contract time you can see how the market is moving
and make a decision but they also have several disadvantages because there is
a risk of losing the contract, or that the market does not work in your favor, so
you need a lot of knowledge to be successful in this type of operation,
considering that today the dollar has an appreciation expectation, maybe it
could be a good option but the contract is for two years so we would have to
measure the risk first.

In my opinion, considering that this is an already established contract, the best

option to avoid the risks of the exchange rate is a forward contract, in this way
from the beginning we agree on an exchange rate already established
according to our needs and those of the seller, we must also consider
that it is a long-term contract so there is a long time of uncertainty where
we do not know anything about what could happen, trying to predict the
market may not be smart.

 These offer us great flexibility as they give us the opportunity to adapt to the
needs of the company.
 You eliminate the risk of appreciation of the local currency.