Pham Thi Ngoc Vy

K184081136

Receivable SFR = 1.000.000

SFr’s Spot rate = 0.63$
SFr's 120-day Forward rate = 0.72$
SFr USD
Deposit 6.2% 5.0%
Loan 7.5% 6.0%

Probability
0.70 $ 20%
0.73 $ 70%
0.75 $ 10%

SFr put option:

Strike price = 0.68$
Buy price = 0.04$
SFr call option:
Strike price = 0.66$
Buy price = 0.03$

(1) Forward Contracts

The amount of USD that Hilton International will receive after 120 days =
1.000.000 * 0.72 = 720.000 $.

(2) Money Market

 The amount of SFr that Hilton International has to borrow to receive 1,000,000
1.000.000
SFr after 120 days = 1+ 0.075 = 975.609,7561 SFr.
3

The amount of USD that Hilton International deposites = 975.609,7561 * 0.63

= 614.634,1463 USD.

The amount of USD that Hilton International will receive after 120 days =
0.05
614.634,1463 * (1+ 3 ¿ = 624.878,0487$.

(3) Option Contract

Hilton International hopes to receive 1.000.000 SFr after 120 days so the
company is a long position. Therefore, we must prevent it with a short position.

Prevention by buying a put at Strike Price X = 0.68$; Buy Price P = 0.04$.

Futures Spot rates Probability The amount of USD

that Hilton
International will
receive after 120 days
when hedge by buying
put option.
0.70 USD 20% (0.70 – 0.04) *
1.000.000 * 0.2 =
132.000 $
0.73 USD 70% (0.73 – 0.04) *
1.000.000 * 0.7 =
483.000 $
0.75 USD 10% (0.75 – 0.04) *
1.000.000 * 0.1 =
71.000 $

Total amount of USD that Hilton International will receive after 120 days when
hedge by buying put option = 132.000 + 483.000 + 71.000 = 686.000$.
(4) Non-Preventive
Futures Spot rates Probability The amount of USD
that Hilton
International must pay
after 120 days
0.70 USD 20% 0.7 * 1.000.000 * 0.2 =
140.000
0.73 USD 70% 0.73 * 1.000.000 * 0.7 =
511.000
0.75 USD 10% 0.75 * 1.000.000 * 0.1 =
75.000

Total amount of USD that Hilton International must receive after 120 days =
140.000 + 511.000 + 75.000 = 726.000$.

Among Forward Contracts, Money Markets and Option Contracts, the Forward
Contracts will be the most appropriate because of when using this option, the
amount of USD that Hilton International will receive after 120 days be the
highest of all and it has a 100% payout rate.

If Hilton International use Not-Preventive, the amount of USD that the

company will receive after 120 days be 726.000$, greater than the amount that
preventing by Option Contracts with 686.000$. But the amount that be received
without prevention will have a probability of 20% with 700.000$, 70% with
730.000$ and 10% with 750.000$.

Therefore, if Hilton International likes risks, the company should not prevent
this receivable. If Hilton International does not like risks, this company should
prevent by using Options Contracts for the receivables.