Firm “M” is a U.S. company that has exposure to the Swiss francs (SF)
Question
Firm “M” is a U.S. company that has exposure to the Swiss francs (SF) and Danish kroner (DK). It has net outflows of SF200 million and net inflows of DK500 million. The present exchange rate of the SF is about $.40 while the present exchange rate of the DK is $.20. Firm “M” has not hedged these positions. The SF and DK are highly correlated in their movements against the dollar. If the dollar weakens:
