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 14.
Fecha: 26 de abril del 2023.
Bibliografía:
 MexDer. (2023). Future Listed contracts at MexDer. Retrieved by:
http://www.mexder.com.mx/wb3/wb/MEX/contratos_futuro/_rid/5?
language=en&lng_act=lng_step2.
 BBVA. (2023). ¿Que son los contratos futuros?. Recuperado de:
https://www.bbva.com/es/que-son-los-contratos-de-futuros/.

ACTIVITY 14. Hedging Payables Strategies.

Imagine a Mexican company has an account payable in euros with an expiration date in 12
months for an equivalent of 500,000 euros. 

Due to the exchange rate fluctuation of the Mexican peso against the euro, 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. 

 A forward contract: If what he wants is to eliminate the risk of

depreciation of the local currency, a forward contract is his option because
in this way he will be able to negotiate a fixed exchange rate, and will not
have to worry about movements in the currencies.
 Future contracts: In futures contracts, the client and the seller agree to sell
and buy an asset at a specific price and on a specific date, It is a way in
which companies avoid exchange rate risks, as it is like an agreement that a
purchase will be made in the future but with today's price, avoiding
inflation and other economic risks that exist.
 Option contract: With this type of contract, you acquire the right to buy an
asset at a fixed price for a set period, but at the same time they do not
force you to buy it, if you decide that it is not convenient for you, leave it
and that's it, meanwhile this does force the seller to deliver the asset to
you at the previously specified price, but in this case you have to pay a
premium to be able to access these benefits.
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2. If the forward exchange rate offered by a financial institution is $24.36 MXP/EUR,

how much would he have to pay to the company in 12 months? 

EUR 500,000 * 24.36 MXP = 12,180,000 pesos.

In 12 months the company would have to pay 12,180,000 mexican pesos.

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

rate upon the expiration date (settlement price) is $25.00 MXP/EUR, how much
would he have to pay to the company upon the expiration date? 

In this case we know that by MexDer, the contract size of Euro currency is 10,000
blocks, we have to buy 50 future contracts in order to be able to pay our debt in a
year.

EUR 10,000 * 50 contracts * $25.00 MXP = 12,500,000

So this means upon the termination of the contract the company will have to pay
12,500,000 pesos MXN.

4. If the size of the options and futures contract on euros is traded in blocks of
10,000 euros, the strike price is $24.80 MXP/EUR and the premium is 0.10 pesos
per euro, what type of hedging payables would you recommend the Chief
Financial Officer of the company to choose? Justify your answer. 

Future contract: 10,000 EUR * 50 contracts * $24.80 = 12,400,000

Option contract: 12,400,000 + 50,000 pesos premium.

One option is a contract where you can agree to buy assets at a strike price, but
without the obligation to buy it necessarily, only that to access this you will have to
pay a premium, What is best for you depends on your needs and objectives, but
analyzing our case we know that what we want is simply not to lose our money
due to the risk of the exchange rate, so futures contracts are more convenient for
us because in this way we agree from how much we are going to earn right know,
without worrying or having to be aware of our investments all year round.

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

Every economic transaction has its risks, in my opinion, the most convenient
type of hedging is Forward contract, in this case, there is no possibility of
winning or losing, since they are made based on the needs of the company, the
risk is absorbed by both parties, since the price of the assets can go up or down
at any time but you already set a price that cannot be changed.

 It does not matter if the market price goes up or down because a purchase
price has already been set that will not be changed,
 You eliminate the risk of depreciation of the domestic currency.
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 You can make them according to the needs of the company, specifying what
exchange rate the payment will be, the currency in which the payment will be
received, the amount of money the company will receive, and the expiration
date.

In these uncertain times I would recommend to take a safer side, In this way, you
are already sure of how much money you will receive and when you will receive it
without abstaining from the current exchange rate.