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# Assessing Currency Volatility

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Zemart is a U.S. firm that plans to establish international business in which it will export to Mexico (these exports will be denomiated in Pesos) and to Canada (these exports will be denominated in Canadian dollars) once a month and will therefore receive payments once a month. It is concerned about exchange rate risk. It wants to compare the standard deviation of exchange rate movements of these two currencies against the U.S. dollar on a monthly basis. For this reason, it asks you:

a) Estimate the standard deviation of the monthly movements in the Canadian dollar against the U.S. dollar over the last 12 months.

b) Estimate the standard deviation of the monthly movements in the Mexican peso against the U.S. dollar over the last 12 months.

c) Determine which currency is less volatile.

You can use the oanda.com website, or any legitimate site that has currency data, to obtain the end of month direct exchange rate of the peso and the Canadian dollar in order to complete the analysis. Please use Excel.

#### Solution Preview

Please also see the attached Excel File

Zemart is a U.S. firm that plans to establish international business in which it will export to Mexico (these exports will be denominated in Pesos) and to Canada (these exports will be denominated in Canadian dollars) once a month and will therefore receive payments once a month. It is concerned about exchange rate risk. It wants to compare the standard deviation of exchange rate movements of these two currencies against the U.S. dollar on a monthly basis. For this reason, it asks you:

a) Estimate the standard deviation of the monthly movements in the Canadian dollar against the U.S. dollar over the last 12 months.

#### Solution Summary

Estimates the standard deviation of the monthly movements in the Mexican peso against the U.S. dollar and the standard deviation of the monthly movements in the Canadian dollar against the U.S. dollar.

\$2.19

## Options, Futures and Derivatives- international currency

Find attached the Problem Requirement - Options, Futures & Derivatives.
PLEASE ENSURE TO PROVIDE DETAILED RESPONSES with Formulas and explanation & NOT STUDY GUIDE. Find attached the Assessment Additional file

THIS IS NOT ASSIGNMENT

Can you please provide the following as follows for Problem 1:
You will be required to calculate the risk characteristics of the Cheapest-to-Deliver (CTD) bonds and the bond futures from the information provided.

You may also wish to price FX options using the volatility data provided and so an Excel based FX Options calculator will be made available to you.

FX forwards can be valued using the data provided.

You may also wish to consider what other risks are present and what could be done about them.

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