Kumu / Labs / FX Hedging Lab

The FX Hedging Lab

A live version of the workbook you'll spec at Stage 2 and build at Stage 3. Enter your scenario — receivable, rates, strikes — and watch the forward hedge, the three-step money-market hedge, the parity check, and the ±5% sensitivity grid compute exactly the way your build should. At Stage 4 this lab is your check-figure oracle: enter your live inputs, and if the lab disagrees with your workbook, one of them is wrong — find out which.

Named ranges: FC_AMT, S0_in, F0_in… Simple interest, ACT/360 — course convention

Sample ≈ course Scenario 1: EUR 4,500,000 receivable, one year out. Swap in your assigned scenario's numbers before writing your spec — twenty minutes here tells you what every output should look like.

Scenario inputs yellow cells

Hedge results gray cells

Forward hedgeFC_AMT × F0_in—

Money-market hedge — 3 steps

1 · Borrow FCFC_AMT / (1 + R_FC × T/360)—
2 · Convert at spotborrowed × S0_in—
3 · Invest in USDUSD × (1 + R_USD × T/360)—

Interest-rate-parity check

Implied forwardS0 × (1+R_USD·T/360)/(1+R_FC·T/360)—
Quoted forwardF0_in—

Sensitivity: USD proceeds across ending spot rates (±5%)

Eleven scenarios, 1% steps — the exact grid your workbook must produce. Watch which strategy "wins" flip as S_T crosses the forward rate and the put strike; that crossover is the entire Stage 5 recommendation discussion.

Reading the shapes

Unhedged is a diagonal — full exposure both directions. Forward/MM is flat — certainty, bought by surrendering the upside. Put is the hockey stick — a floor on the left, participation (minus the premium) on the right. Your recommendation is really a choice between these three shapes.

What about the call option?

A call on EUR profits when the euro rises — which is the direction that already helps a receivable. So for this scenario the put is the hedge and the call is the comparison case: it's the tool you'd reach for if the exposure were reversed — a EUR payable, where a strengthening euro raises your cost and min(S_T, K_CALL) + PREM_CALL caps it. Your Stage 5 memo's "when and why this applies" line for calls is exactly this point.

Things to try