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Chapter 10

6.6 Exam shortcut – the ‘lock-in’ rate

The calculation of the likely financial result of the futures hedge was a
lengthy calculation, and it also relied upon being able to estimate the
spot rate on the transaction date.

There is a much simpler way of estimating the likely financial result of
the futures hedge, by just calculating the overall 'lock-in rate' for the
hedge.

Lock-in rate = Opening futures price + unexpired basis on the
transaction date

Illustrations and further practice

Now try Illustrations 1 and 2 in Chapter 10

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