A US company has borrowings from Switzerland. The loan repayment of CHF 50 million is due. It is important to minimise the impact on the outflow. Devise a suitable strategy. Evaluate the chosen strategy against suitable alternatives for a range of expected future spot rates.
Spot rate = 0.9888 CHF/USD
3 month forward rate = 3 month future rate = 0.9796 CHF/USD
Strike Price Call Option Put Option
0.9850 0.0108 0.0146
0.9900 0.0087 0.0175
Each option contract has a size of 125,000 Swiss Francs.