medium · FRM Part 1 Financial Markets and Products
A U.S. investor holds a CHF 1,000,000 bond. The current spot rate is CHF/USD = 1.10.
To hedge the CHF exposure for 6 months, the investor should:
- Sell USD $1,000,000 forward against the CHF.
- Buy CHF $1,000,000 in the spot market.
- Buy a CHF call option to protect against a weaker CHF.
- Sell CHF $1,000,000 forward against the USD.
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