Money Market Hedging

Question 1

Formula for step 2? MMH

Answer 1

(Foreign currency amnt / (1+(Foreign borrow or deposit IR %) * Pro rated))

Question 2

Formula for step 4? MMH

Answer 2

£ Deposit amnt * (1+(UK Deposit or Borrow IR%)) * Pro rated

Question 3

What are the four steps? MMH

Answer 3

1: Decide whether liability or asset needed (If receipt = liability)
2: Use the foreign borrow/deposit IR formula
3: Translate #2 into GBP.
4: Use the UK Deposit/borrow IR Formula

Question 4

Disadvantages of MMH?

Answer 4

It is not simple nor is it easy.

Question 5

What gets prorated?

Answer 5

The rate