A U.S. firm holds an asset in Italy and faces the following scenario: Where P^* = Euro price of the asset held by the U.S. firm
The CFO decides to hedge his exposure by selling forward the expected value of the euro denominated cash flow at F₁($/£) = $1.50/€. As a result

Question

A U.S. firm holds an asset in Italy and faces the following scenario:

Where P^* = Euro price of the asset held by the U.S. firm
The CFO decides to hedge his exposure by selling forward the expected value of the euro denominated cash flow at F₁($/£) = $1.50/€. As a result

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The Answer of A U.S. firm holds an asset in Italy and faces the following scenario: Where P^* = Euro price of the asset held by the U.S. firm The CFO decides to hedge his exposure by selling forward the expected value of the euro denominated cash flow at F₁($/£) = $1.50/€. As a result

A US Firm Holds an Asset in Italy and Faces the the Following