A recent WSJ reports:
“MNC managers, investors and analysts widely expect that the yuan will fall against the dollar this year, extending a 6.6% drop in 2016 that was the largest in two decades. The bearishness reflects China’s slowing economy, rising debt and volatile capital outflows, as well as concern that the world’s most-populous nation could be headed for a trade showdown with the Trump administration.”
a) Suppose you have receivables of 10 mil. Chinese yuan to be paid to you by a borrower from China at the end of this year. Please present your proposal how you minimize FX risk exposures in this case.
b) Suppose you are interest in investing in FX derivatives in Chinese yuan for next 6 month period. Please present your proposal for using specific FX options to maximize your return and minimize your FX risks.
