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  6. It is Tuesday afternoon, February 14, 2012.
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Question: It is Tuesday afternoon, February 14, 2012.

It is Tuesday afternoon, February 14, 2012. Richard May, Assistant Treasurer atAmerican Digital Graphics (ADG), sits in his office on the thirty-fourth floor of thebuilding that dominates Rockefeller Plaza’s west perimeter. It’s Valentine’s Day, andRichard and his wife have dinner reservations with another couple at Balthazarat 7:30. I must get this hedging memo done, thinks May, and get out of here. Foreignexchange options? I had better get the story straight before someone in the FinanceCommittee starts asking questions. Let’s see, there are two ways in which I can envisionus using options now. One is to hedge' data-toggle="tooltip" data-placement="top" title="Click to view definition...">hedge a dividend due on September 15th fromADG Germany. The other is to hedge our upcoming payment to Matsumerda for theirspring RAM chip statement. With the yen at 78 and increasing I’m glad we haven’tcovered the payment so far, but now I’m getting nervous and I would like to protectmy posterior. An option to buy yen on June 10 might be just the thing. Before we delve any further into Richard May’s musings, let us learn a bit aboutADG and about foreign exchange options. American Digital Graphics is a $12 billionsales company engaged in, among other things, the development, manufacture, andmarketing of microprocessor-based equipment. Although 30 percent of the firm’ssales are currently abroad, the firm has full-fledged manufacturing facilities in onlythree foreign countries, Germany, Canada, and Brazil. An assembly plant in Singaporeexists primarily to solder Japanese semiconductor chips onto circuit boards and toscrew these into Brazilian-made boxes for shipment to the United States, Canada,and Germany. The German subsidiary' data-toggle="tooltip" data-placement="top" title="Click to view definition...">subsidiary has developed half of its sales to France, theNetherlands, and the United Kingdom, billing in euros. ADG Germany has accumulateda cash reserve of €900,000, worth $1,178,100 at today’s exchange rate. Whilethe Hamburg office has automatic permission to repatriate €3 million, they have beenurged to seek authorization to convert another €1 million by September 15th. Thefirm has an agreement to buy three hundred thousand RAM chips at ¥8000 eachsemi-annually, and it is this payment that will fall due on June 10th.The conventional means of hedging exchange risk are forward or future contracts.These, however, are fixed and inviolable agreements. In many practical instances thehedger is uncertain whether foreign currency cash inflow or outflow will materialize.In such cases, what is needed is the right, but not the obligation, to buy or sell adesignated quantity of a foreign currency at a specified price (exchange rate). This isprecisely what a foreign exchange option provides. A foreign exchange option gives the holder the right to buy or sell a designatedquantity of a foreign currency at a specified exchange rate up to or at a stipulateddate. The terminal date of the contract is called the expiration date (or maturity date).If the option may be exercised before the expiration date, it is called an Americanoption; if only at the expiration date, a European option. The party retaining the option is the option buyer; the party giving the option isthe option seller (or writer). The exchange rate at which the option can be exercisedis called the exercise price or strike price. The buyer of the option must pay the sellersome amount, called the option price or the premium, for the rights involved. The important feature of a foreign exchange option is that the holder of the optionhas the right, but not the obligation, to exercise it. He will only exercise it if the currencymoves in a favorable direction. Thus, once you have paid for an option, you cannotlose, unlike a forward contract, where you are obliged to exchange the currenciesand therefore will lose if the movement is unfavorable. The disadvantage of an option contract, compared to a forward or futures contractis that you have to pay a price for the option, and this price or premium tends to bequite high for certain options. In general, the option’s price will be higher the greaterthe risk to the seller (and the greater the value to the buyer because this is a zero-sumgame). The risk of a call option will be greater, and the premium higher, the higherthe forward rate relative to the exercise price; after all, one can always lock in a profitby buying at the exercise price and selling at the forward rate. The chance that theoption will be exercised profitably is also higher, the more volatile is the currency, andthe longer the option has to run before it expires. Returning to Richard May in his Rockefeller Center office, we find that he has beenprinting spot, forward and currency options, and futures quotations from the company’sBloomberg terminal. The option prices are quoted in U.S. cents per euro. Yen are quoted in hundredthsof a cent. Looking at these prices, Richard realizes that he can work out how muchthe euro or yen would have to change to make the option worthwhile. Richard makesa mental note that ADG can typically borrow in the Eurocurrency market at LIBOR +1% and lend at LIBID. “I’ll attach these numbers to my memo,” mutters May, but the truth is he has yetto come to grips with the real question, which is when, if ever, are currency options abetter means of hedging exchange risk for an international firm than traditional forwardexchange contracts or future’s contracts. Please assist Mr. May in his analysis of currency hedging for his report to ADG’sFinance Committee. In doing so, you may consult the highlighted market quotes below.
It is Tuesday afternoon, February 14, 2012. Richard May, Assistant Treasurer atAmerican Digital Graphics (ADG), sits in his office on the thirty-fourth floor of thebuilding that dominates Rockefeller Plaza’s west perimeter. It’s Valentine’s Day, andRichard and his wife have dinner reservations with another couple at Balthazarat 7:30. I must get this hedging memo done, thinks May, and get out of here. Foreignexchange options? I had better get the story straight before someone in the FinanceCommittee starts asking questions. Let’s see, there are two ways in which I can envisionus using options now. One is to hedge a dividend due on September 15th fromADG Germany. The other is to hedge our upcoming payment to Matsumerda for theirspring RAM chip statement. With the yen at 78 and increasing I’m glad we haven’tcovered the payment so far, but now I’m getting nervous and I would like to protectmy posterior. An option to buy yen on June 10 might be just the thing. Before we delve any further into Richard May’s musings, let us learn a bit aboutADG and about foreign exchange options. American Digital Graphics is a $12 billionsales company engaged in, among other things, the development, manufacture, andmarketing of microprocessor-based equipment. Although 30 percent of the firm’ssales are currently abroad, the firm has full-fledged manufacturing facilities in onlythree foreign countries, Germany, Canada, and Brazil. An assembly plant in Singaporeexists primarily to solder Japanese semiconductor chips onto circuit boards and toscrew these into Brazilian-made boxes for shipment to the United States, Canada,and Germany. The German subsidiary has developed half of its sales to France, theNetherlands, and the United Kingdom, billing in euros. ADG Germany has accumulateda cash reserve of €900,000, worth $1,178,100 at today’s exchange rate. Whilethe Hamburg office has automatic permission to repatriate €3 million, they have beenurged to seek authorization to convert another €1 million by September 15th. Thefirm has an agreement to buy three hundred thousand RAM chips at ¥8000 eachsemi-annually, and it is this payment that will fall due on June 10th.The conventional means of hedging exchange risk are forward or future contracts.These, however, are fixed and inviolable agreements. In many practical instances thehedger is uncertain whether foreign currency cash inflow or outflow will materialize.In such cases, what is needed is the right, but not the obligation, to buy or sell adesignated quantity of a foreign currency at a specified price (exchange rate). This isprecisely what a foreign exchange option provides. A foreign exchange option gives the holder the right to buy or sell a designatedquantity of a foreign currency at a specified exchange rate up to or at a stipulateddate. The terminal date of the contract is called the expiration date (or maturity date).If the option may be exercised before the expiration date, it is called an Americanoption; if only at the expiration date, a European option. The party retaining the option is the option buyer; the party giving the option isthe option seller (or writer). The exchange rate at which the option can be exercisedis called the exercise price or strike price. The buyer of the option must pay the sellersome amount, called the option price or the premium, for the rights involved. The important feature of a foreign exchange option is that the holder of the optionhas the right, but not the obligation, to exercise it. He will only exercise it if the currencymoves in a favorable direction. Thus, once you have paid for an option, you cannotlose, unlike a forward contract, where you are obliged to exchange the currenciesand therefore will lose if the movement is unfavorable. The disadvantage of an option contract, compared to a forward or futures contractis that you have to pay a price for the option, and this price or premium tends to bequite high for certain options. In general, the option’s price will be higher the greaterthe risk to the seller (and the greater the value to the buyer because this is a zero-sumgame). The risk of a call option will be greater, and the premium higher, the higherthe forward rate relative to the exercise price; after all, one can always lock in a profitby buying at the exercise price and selling at the forward rate. The chance that theoption will be exercised profitably is also higher, the more volatile is the currency, andthe longer the option has to run before it expires. Returning to Richard May in his Rockefeller Center office, we find that he has beenprinting spot, forward and currency options, and futures quotations from the company’sBloomberg terminal. The option prices are quoted in U.S. cents per euro. Yen are quoted in hundredthsof a cent. Looking at these prices, Richard realizes that he can work out how muchthe euro or yen would have to change to make the option worthwhile. Richard makesa mental note that ADG can typically borrow in the Eurocurrency market at LIBOR +1% and lend at LIBID. “I’ll attach these numbers to my memo,” mutters May, but the truth is he has yetto come to grips with the real question, which is when, if ever, are currency options abetter means of hedging exchange risk for an international firm than traditional forwardexchange contracts or future’s contracts. Please assist Mr. May in his analysis of currency hedging for his report to ADG’sFinance Committee. In doing so, you may consult the highlighted market quotes below.

It is Tuesday afternoon, February 14, 2012. Richard May, Assistant Treasurer atAmerican Digital Graphics (ADG), sits in his office on the thirty-fourth floor of thebuilding that dominates Rockefeller Plaza’s west perimeter. It’s Valentine’s Day, andRichard and his wife have dinner reservations with another couple at Balthazarat 7:30. I must get this hedging memo done, thinks May, and get out of here. Foreignexchange options? I had better get the story straight before someone in the FinanceCommittee starts asking questions. Let’s see, there are two ways in which I can envisionus using options now. One is to hedge a dividend due on September 15th fromADG Germany. The other is to hedge our upcoming payment to Matsumerda for theirspring RAM chip statement. With the yen at 78 and increasing I’m glad we haven’tcovered the payment so far, but now I’m getting nervous and I would like to protectmy posterior. An option to buy yen on June 10 might be just the thing. Before we delve any further into Richard May’s musings, let us learn a bit aboutADG and about foreign exchange options. American Digital Graphics is a $12 billionsales company engaged in, among other things, the development, manufacture, andmarketing of microprocessor-based equipment. Although 30 percent of the firm’ssales are currently abroad, the firm has full-fledged manufacturing facilities in onlythree foreign countries, Germany, Canada, and Brazil. An assembly plant in Singaporeexists primarily to solder Japanese semiconductor chips onto circuit boards and toscrew these into Brazilian-made boxes for shipment to the United States, Canada,and Germany. The German subsidiary has developed half of its sales to France, theNetherlands, and the United Kingdom, billing in euros. ADG Germany has accumulateda cash reserve of €900,000, worth $1,178,100 at today’s exchange rate. Whilethe Hamburg office has automatic permission to repatriate €3 million, they have beenurged to seek authorization to convert another €1 million by September 15th. Thefirm has an agreement to buy three hundred thousand RAM chips at ¥8000 eachsemi-annually, and it is this payment that will fall due on June 10th.The conventional means of hedging exchange risk are forward or future contracts.These, however, are fixed and inviolable agreements. In many practical instances thehedger is uncertain whether foreign currency cash inflow or outflow will materialize.In such cases, what is needed is the right, but not the obligation, to buy or sell adesignated quantity of a foreign currency at a specified price (exchange rate). This isprecisely what a foreign exchange option provides. A foreign exchange option gives the holder the right to buy or sell a designatedquantity of a foreign currency at a specified exchange rate up to or at a stipulateddate. The terminal date of the contract is called the expiration date (or maturity date).If the option may be exercised before the expiration date, it is called an Americanoption; if only at the expiration date, a European option. The party retaining the option is the option buyer; the party giving the option isthe option seller (or writer). The exchange rate at which the option can be exercisedis called the exercise price or strike price. The buyer of the option must pay the sellersome amount, called the option price or the premium, for the rights involved. The important feature of a foreign exchange option is that the holder of the optionhas the right, but not the obligation, to exercise it. He will only exercise it if the currencymoves in a favorable direction. Thus, once you have paid for an option, you cannotlose, unlike a forward contract, where you are obliged to exchange the currenciesand therefore will lose if the movement is unfavorable. The disadvantage of an option contract, compared to a forward or futures contractis that you have to pay a price for the option, and this price or premium tends to bequite high for certain options. In general, the option’s price will be higher the greaterthe risk to the seller (and the greater the value to the buyer because this is a zero-sumgame). The risk of a call option will be greater, and the premium higher, the higherthe forward rate relative to the exercise price; after all, one can always lock in a profitby buying at the exercise price and selling at the forward rate. The chance that theoption will be exercised profitably is also higher, the more volatile is the currency, andthe longer the option has to run before it expires. Returning to Richard May in his Rockefeller Center office, we find that he has beenprinting spot, forward and currency options, and futures quotations from the company’sBloomberg terminal. The option prices are quoted in U.S. cents per euro. Yen are quoted in hundredthsof a cent. Looking at these prices, Richard realizes that he can work out how muchthe euro or yen would have to change to make the option worthwhile. Richard makesa mental note that ADG can typically borrow in the Eurocurrency market at LIBOR +1% and lend at LIBID. “I’ll attach these numbers to my memo,” mutters May, but the truth is he has yetto come to grips with the real question, which is when, if ever, are currency options abetter means of hedging exchange risk for an international firm than traditional forwardexchange contracts or future’s contracts. Please assist Mr. May in his analysis of currency hedging for his report to ADG’sFinance Committee. In doing so, you may consult the highlighted market quotes below.

It is Tuesday afternoon, February 14, 2012. Richard May, Assistant Treasurer atAmerican Digital Graphics (ADG), sits in his office on the thirty-fourth floor of thebuilding that dominates Rockefeller Plaza’s west perimeter. It’s Valentine’s Day, andRichard and his wife have dinner reservations with another couple at Balthazarat 7:30. I must get this hedging memo done, thinks May, and get out of here. Foreignexchange options? I had better get the story straight before someone in the FinanceCommittee starts asking questions. Let’s see, there are two ways in which I can envisionus using options now. One is to hedge a dividend due on September 15th fromADG Germany. The other is to hedge our upcoming payment to Matsumerda for theirspring RAM chip statement. With the yen at 78 and increasing I’m glad we haven’tcovered the payment so far, but now I’m getting nervous and I would like to protectmy posterior. An option to buy yen on June 10 might be just the thing. Before we delve any further into Richard May’s musings, let us learn a bit aboutADG and about foreign exchange options. American Digital Graphics is a $12 billionsales company engaged in, among other things, the development, manufacture, andmarketing of microprocessor-based equipment. Although 30 percent of the firm’ssales are currently abroad, the firm has full-fledged manufacturing facilities in onlythree foreign countries, Germany, Canada, and Brazil. An assembly plant in Singaporeexists primarily to solder Japanese semiconductor chips onto circuit boards and toscrew these into Brazilian-made boxes for shipment to the United States, Canada,and Germany. The German subsidiary has developed half of its sales to France, theNetherlands, and the United Kingdom, billing in euros. ADG Germany has accumulateda cash reserve of €900,000, worth $1,178,100 at today’s exchange rate. Whilethe Hamburg office has automatic permission to repatriate €3 million, they have beenurged to seek authorization to convert another €1 million by September 15th. Thefirm has an agreement to buy three hundred thousand RAM chips at ¥8000 eachsemi-annually, and it is this payment that will fall due on June 10th.The conventional means of hedging exchange risk are forward or future contracts.These, however, are fixed and inviolable agreements. In many practical instances thehedger is uncertain whether foreign currency cash inflow or outflow will materialize.In such cases, what is needed is the right, but not the obligation, to buy or sell adesignated quantity of a foreign currency at a specified price (exchange rate). This isprecisely what a foreign exchange option provides. A foreign exchange option gives the holder the right to buy or sell a designatedquantity of a foreign currency at a specified exchange rate up to or at a stipulateddate. The terminal date of the contract is called the expiration date (or maturity date).If the option may be exercised before the expiration date, it is called an Americanoption; if only at the expiration date, a European option. The party retaining the option is the option buyer; the party giving the option isthe option seller (or writer). The exchange rate at which the option can be exercisedis called the exercise price or strike price. The buyer of the option must pay the sellersome amount, called the option price or the premium, for the rights involved. The important feature of a foreign exchange option is that the holder of the optionhas the right, but not the obligation, to exercise it. He will only exercise it if the currencymoves in a favorable direction. Thus, once you have paid for an option, you cannotlose, unlike a forward contract, where you are obliged to exchange the currenciesand therefore will lose if the movement is unfavorable. The disadvantage of an option contract, compared to a forward or futures contractis that you have to pay a price for the option, and this price or premium tends to bequite high for certain options. In general, the option’s price will be higher the greaterthe risk to the seller (and the greater the value to the buyer because this is a zero-sumgame). The risk of a call option will be greater, and the premium higher, the higherthe forward rate relative to the exercise price; after all, one can always lock in a profitby buying at the exercise price and selling at the forward rate. The chance that theoption will be exercised profitably is also higher, the more volatile is the currency, andthe longer the option has to run before it expires. Returning to Richard May in his Rockefeller Center office, we find that he has beenprinting spot, forward and currency options, and futures quotations from the company’sBloomberg terminal. The option prices are quoted in U.S. cents per euro. Yen are quoted in hundredthsof a cent. Looking at these prices, Richard realizes that he can work out how muchthe euro or yen would have to change to make the option worthwhile. Richard makesa mental note that ADG can typically borrow in the Eurocurrency market at LIBOR +1% and lend at LIBID. “I’ll attach these numbers to my memo,” mutters May, but the truth is he has yetto come to grips with the real question, which is when, if ever, are currency options abetter means of hedging exchange risk for an international firm than traditional forwardexchange contracts or future’s contracts. Please assist Mr. May in his analysis of currency hedging for his report to ADG’sFinance Committee. In doing so, you may consult the highlighted market quotes below.

It is Tuesday afternoon, February 14, 2012. Richard May, Assistant Treasurer atAmerican Digital Graphics (ADG), sits in his office on the thirty-fourth floor of thebuilding that dominates Rockefeller Plaza’s west perimeter. It’s Valentine’s Day, andRichard and his wife have dinner reservations with another couple at Balthazarat 7:30. I must get this hedging memo done, thinks May, and get out of here. Foreignexchange options? I had better get the story straight before someone in the FinanceCommittee starts asking questions. Let’s see, there are two ways in which I can envisionus using options now. One is to hedge a dividend due on September 15th fromADG Germany. The other is to hedge our upcoming payment to Matsumerda for theirspring RAM chip statement. With the yen at 78 and increasing I’m glad we haven’tcovered the payment so far, but now I’m getting nervous and I would like to protectmy posterior. An option to buy yen on June 10 might be just the thing. Before we delve any further into Richard May’s musings, let us learn a bit aboutADG and about foreign exchange options. American Digital Graphics is a $12 billionsales company engaged in, among other things, the development, manufacture, andmarketing of microprocessor-based equipment. Although 30 percent of the firm’ssales are currently abroad, the firm has full-fledged manufacturing facilities in onlythree foreign countries, Germany, Canada, and Brazil. An assembly plant in Singaporeexists primarily to solder Japanese semiconductor chips onto circuit boards and toscrew these into Brazilian-made boxes for shipment to the United States, Canada,and Germany. The German subsidiary has developed half of its sales to France, theNetherlands, and the United Kingdom, billing in euros. ADG Germany has accumulateda cash reserve of €900,000, worth $1,178,100 at today’s exchange rate. Whilethe Hamburg office has automatic permission to repatriate €3 million, they have beenurged to seek authorization to convert another €1 million by September 15th. Thefirm has an agreement to buy three hundred thousand RAM chips at ¥8000 eachsemi-annually, and it is this payment that will fall due on June 10th.The conventional means of hedging exchange risk are forward or future contracts.These, however, are fixed and inviolable agreements. In many practical instances thehedger is uncertain whether foreign currency cash inflow or outflow will materialize.In such cases, what is needed is the right, but not the obligation, to buy or sell adesignated quantity of a foreign currency at a specified price (exchange rate). This isprecisely what a foreign exchange option provides. A foreign exchange option gives the holder the right to buy or sell a designatedquantity of a foreign currency at a specified exchange rate up to or at a stipulateddate. The terminal date of the contract is called the expiration date (or maturity date).If the option may be exercised before the expiration date, it is called an Americanoption; if only at the expiration date, a European option. The party retaining the option is the option buyer; the party giving the option isthe option seller (or writer). The exchange rate at which the option can be exercisedis called the exercise price or strike price. The buyer of the option must pay the sellersome amount, called the option price or the premium, for the rights involved. The important feature of a foreign exchange option is that the holder of the optionhas the right, but not the obligation, to exercise it. He will only exercise it if the currencymoves in a favorable direction. Thus, once you have paid for an option, you cannotlose, unlike a forward contract, where you are obliged to exchange the currenciesand therefore will lose if the movement is unfavorable. The disadvantage of an option contract, compared to a forward or futures contractis that you have to pay a price for the option, and this price or premium tends to bequite high for certain options. In general, the option’s price will be higher the greaterthe risk to the seller (and the greater the value to the buyer because this is a zero-sumgame). The risk of a call option will be greater, and the premium higher, the higherthe forward rate relative to the exercise price; after all, one can always lock in a profitby buying at the exercise price and selling at the forward rate. The chance that theoption will be exercised profitably is also higher, the more volatile is the currency, andthe longer the option has to run before it expires. Returning to Richard May in his Rockefeller Center office, we find that he has beenprinting spot, forward and currency options, and futures quotations from the company’sBloomberg terminal. The option prices are quoted in U.S. cents per euro. Yen are quoted in hundredthsof a cent. Looking at these prices, Richard realizes that he can work out how muchthe euro or yen would have to change to make the option worthwhile. Richard makesa mental note that ADG can typically borrow in the Eurocurrency market at LIBOR +1% and lend at LIBID. “I’ll attach these numbers to my memo,” mutters May, but the truth is he has yetto come to grips with the real question, which is when, if ever, are currency options abetter means of hedging exchange risk for an international firm than traditional forwardexchange contracts or future’s contracts. Please assist Mr. May in his analysis of currency hedging for his report to ADG’sFinance Committee. In doing so, you may consult the highlighted market quotes below.

It is Tuesday afternoon, February 14, 2012. Richard May, Assistant Treasurer atAmerican Digital Graphics (ADG), sits in his office on the thirty-fourth floor of thebuilding that dominates Rockefeller Plaza’s west perimeter. It’s Valentine’s Day, andRichard and his wife have dinner reservations with another couple at Balthazarat 7:30. I must get this hedging memo done, thinks May, and get out of here. Foreignexchange options? I had better get the story straight before someone in the FinanceCommittee starts asking questions. Let’s see, there are two ways in which I can envisionus using options now. One is to hedge a dividend due on September 15th fromADG Germany. The other is to hedge our upcoming payment to Matsumerda for theirspring RAM chip statement. With the yen at 78 and increasing I’m glad we haven’tcovered the payment so far, but now I’m getting nervous and I would like to protectmy posterior. An option to buy yen on June 10 might be just the thing. Before we delve any further into Richard May’s musings, let us learn a bit aboutADG and about foreign exchange options. American Digital Graphics is a $12 billionsales company engaged in, among other things, the development, manufacture, andmarketing of microprocessor-based equipment. Although 30 percent of the firm’ssales are currently abroad, the firm has full-fledged manufacturing facilities in onlythree foreign countries, Germany, Canada, and Brazil. An assembly plant in Singaporeexists primarily to solder Japanese semiconductor chips onto circuit boards and toscrew these into Brazilian-made boxes for shipment to the United States, Canada,and Germany. The German subsidiary has developed half of its sales to France, theNetherlands, and the United Kingdom, billing in euros. ADG Germany has accumulateda cash reserve of €900,000, worth $1,178,100 at today’s exchange rate. Whilethe Hamburg office has automatic permission to repatriate €3 million, they have beenurged to seek authorization to convert another €1 million by September 15th. Thefirm has an agreement to buy three hundred thousand RAM chips at ¥8000 eachsemi-annually, and it is this payment that will fall due on June 10th.The conventional means of hedging exchange risk are forward or future contracts.These, however, are fixed and inviolable agreements. In many practical instances thehedger is uncertain whether foreign currency cash inflow or outflow will materialize.In such cases, what is needed is the right, but not the obligation, to buy or sell adesignated quantity of a foreign currency at a specified price (exchange rate). This isprecisely what a foreign exchange option provides. A foreign exchange option gives the holder the right to buy or sell a designatedquantity of a foreign currency at a specified exchange rate up to or at a stipulateddate. The terminal date of the contract is called the expiration date (or maturity date).If the option may be exercised before the expiration date, it is called an Americanoption; if only at the expiration date, a European option. The party retaining the option is the option buyer; the party giving the option isthe option seller (or writer). The exchange rate at which the option can be exercisedis called the exercise price or strike price. The buyer of the option must pay the sellersome amount, called the option price or the premium, for the rights involved. The important feature of a foreign exchange option is that the holder of the optionhas the right, but not the obligation, to exercise it. He will only exercise it if the currencymoves in a favorable direction. Thus, once you have paid for an option, you cannotlose, unlike a forward contract, where you are obliged to exchange the currenciesand therefore will lose if the movement is unfavorable. The disadvantage of an option contract, compared to a forward or futures contractis that you have to pay a price for the option, and this price or premium tends to bequite high for certain options. In general, the option’s price will be higher the greaterthe risk to the seller (and the greater the value to the buyer because this is a zero-sumgame). The risk of a call option will be greater, and the premium higher, the higherthe forward rate relative to the exercise price; after all, one can always lock in a profitby buying at the exercise price and selling at the forward rate. The chance that theoption will be exercised profitably is also higher, the more volatile is the currency, andthe longer the option has to run before it expires. Returning to Richard May in his Rockefeller Center office, we find that he has beenprinting spot, forward and currency options, and futures quotations from the company’sBloomberg terminal. The option prices are quoted in U.S. cents per euro. Yen are quoted in hundredthsof a cent. Looking at these prices, Richard realizes that he can work out how muchthe euro or yen would have to change to make the option worthwhile. Richard makesa mental note that ADG can typically borrow in the Eurocurrency market at LIBOR +1% and lend at LIBID. “I’ll attach these numbers to my memo,” mutters May, but the truth is he has yetto come to grips with the real question, which is when, if ever, are currency options abetter means of hedging exchange risk for an international firm than traditional forwardexchange contracts or future’s contracts. Please assist Mr. May in his analysis of currency hedging for his report to ADG’sFinance Committee. In doing so, you may consult the highlighted market quotes below.

It is Tuesday afternoon, February 14, 2012. Richard May, Assistant Treasurer atAmerican Digital Graphics (ADG), sits in his office on the thirty-fourth floor of thebuilding that dominates Rockefeller Plaza’s west perimeter. It’s Valentine’s Day, andRichard and his wife have dinner reservations with another couple at Balthazarat 7:30. I must get this hedging memo done, thinks May, and get out of here. Foreignexchange options? I had better get the story straight before someone in the FinanceCommittee starts asking questions. Let’s see, there are two ways in which I can envisionus using options now. One is to hedge a dividend due on September 15th fromADG Germany. The other is to hedge our upcoming payment to Matsumerda for theirspring RAM chip statement. With the yen at 78 and increasing I’m glad we haven’tcovered the payment so far, but now I’m getting nervous and I would like to protectmy posterior. An option to buy yen on June 10 might be just the thing. Before we delve any further into Richard May’s musings, let us learn a bit aboutADG and about foreign exchange options. American Digital Graphics is a $12 billionsales company engaged in, among other things, the development, manufacture, andmarketing of microprocessor-based equipment. Although 30 percent of the firm’ssales are currently abroad, the firm has full-fledged manufacturing facilities in onlythree foreign countries, Germany, Canada, and Brazil. An assembly plant in Singaporeexists primarily to solder Japanese semiconductor chips onto circuit boards and toscrew these into Brazilian-made boxes for shipment to the United States, Canada,and Germany. The German subsidiary has developed half of its sales to France, theNetherlands, and the United Kingdom, billing in euros. ADG Germany has accumulateda cash reserve of €900,000, worth $1,178,100 at today’s exchange rate. Whilethe Hamburg office has automatic permission to repatriate €3 million, they have beenurged to seek authorization to convert another €1 million by September 15th. Thefirm has an agreement to buy three hundred thousand RAM chips at ¥8000 eachsemi-annually, and it is this payment that will fall due on June 10th.The conventional means of hedging exchange risk are forward or future contracts.These, however, are fixed and inviolable agreements. In many practical instances thehedger is uncertain whether foreign currency cash inflow or outflow will materialize.In such cases, what is needed is the right, but not the obligation, to buy or sell adesignated quantity of a foreign currency at a specified price (exchange rate). This isprecisely what a foreign exchange option provides. A foreign exchange option gives the holder the right to buy or sell a designatedquantity of a foreign currency at a specified exchange rate up to or at a stipulateddate. The terminal date of the contract is called the expiration date (or maturity date).If the option may be exercised before the expiration date, it is called an Americanoption; if only at the expiration date, a European option. The party retaining the option is the option buyer; the party giving the option isthe option seller (or writer). The exchange rate at which the option can be exercisedis called the exercise price or strike price. The buyer of the option must pay the sellersome amount, called the option price or the premium, for the rights involved. The important feature of a foreign exchange option is that the holder of the optionhas the right, but not the obligation, to exercise it. He will only exercise it if the currencymoves in a favorable direction. Thus, once you have paid for an option, you cannotlose, unlike a forward contract, where you are obliged to exchange the currenciesand therefore will lose if the movement is unfavorable. The disadvantage of an option contract, compared to a forward or futures contractis that you have to pay a price for the option, and this price or premium tends to bequite high for certain options. In general, the option’s price will be higher the greaterthe risk to the seller (and the greater the value to the buyer because this is a zero-sumgame). The risk of a call option will be greater, and the premium higher, the higherthe forward rate relative to the exercise price; after all, one can always lock in a profitby buying at the exercise price and selling at the forward rate. The chance that theoption will be exercised profitably is also higher, the more volatile is the currency, andthe longer the option has to run before it expires. Returning to Richard May in his Rockefeller Center office, we find that he has beenprinting spot, forward and currency options, and futures quotations from the company’sBloomberg terminal. The option prices are quoted in U.S. cents per euro. Yen are quoted in hundredthsof a cent. Looking at these prices, Richard realizes that he can work out how muchthe euro or yen would have to change to make the option worthwhile. Richard makesa mental note that ADG can typically borrow in the Eurocurrency market at LIBOR +1% and lend at LIBID. “I’ll attach these numbers to my memo,” mutters May, but the truth is he has yetto come to grips with the real question, which is when, if ever, are currency options abetter means of hedging exchange risk for an international firm than traditional forwardexchange contracts or future’s contracts. Please assist Mr. May in his analysis of currency hedging for his report to ADG’sFinance Committee. In doing so, you may consult the highlighted market quotes below.

It is Tuesday afternoon, February 14, 2012. Richard May, Assistant Treasurer atAmerican Digital Graphics (ADG), sits in his office on the thirty-fourth floor of thebuilding that dominates Rockefeller Plaza’s west perimeter. It’s Valentine’s Day, andRichard and his wife have dinner reservations with another couple at Balthazarat 7:30. I must get this hedging memo done, thinks May, and get out of here. Foreignexchange options? I had better get the story straight before someone in the FinanceCommittee starts asking questions. Let’s see, there are two ways in which I can envisionus using options now. One is to hedge a dividend due on September 15th fromADG Germany. The other is to hedge our upcoming payment to Matsumerda for theirspring RAM chip statement. With the yen at 78 and increasing I’m glad we haven’tcovered the payment so far, but now I’m getting nervous and I would like to protectmy posterior. An option to buy yen on June 10 might be just the thing. Before we delve any further into Richard May’s musings, let us learn a bit aboutADG and about foreign exchange options. American Digital Graphics is a $12 billionsales company engaged in, among other things, the development, manufacture, andmarketing of microprocessor-based equipment. Although 30 percent of the firm’ssales are currently abroad, the firm has full-fledged manufacturing facilities in onlythree foreign countries, Germany, Canada, and Brazil. An assembly plant in Singaporeexists primarily to solder Japanese semiconductor chips onto circuit boards and toscrew these into Brazilian-made boxes for shipment to the United States, Canada,and Germany. The German subsidiary has developed half of its sales to France, theNetherlands, and the United Kingdom, billing in euros. ADG Germany has accumulateda cash reserve of €900,000, worth $1,178,100 at today’s exchange rate. Whilethe Hamburg office has automatic permission to repatriate €3 million, they have beenurged to seek authorization to convert another €1 million by September 15th. Thefirm has an agreement to buy three hundred thousand RAM chips at ¥8000 eachsemi-annually, and it is this payment that will fall due on June 10th.The conventional means of hedging exchange risk are forward or future contracts.These, however, are fixed and inviolable agreements. In many practical instances thehedger is uncertain whether foreign currency cash inflow or outflow will materialize.In such cases, what is needed is the right, but not the obligation, to buy or sell adesignated quantity of a foreign currency at a specified price (exchange rate). This isprecisely what a foreign exchange option provides. A foreign exchange option gives the holder the right to buy or sell a designatedquantity of a foreign currency at a specified exchange rate up to or at a stipulateddate. The terminal date of the contract is called the expiration date (or maturity date).If the option may be exercised before the expiration date, it is called an Americanoption; if only at the expiration date, a European option. The party retaining the option is the option buyer; the party giving the option isthe option seller (or writer). The exchange rate at which the option can be exercisedis called the exercise price or strike price. The buyer of the option must pay the sellersome amount, called the option price or the premium, for the rights involved. The important feature of a foreign exchange option is that the holder of the optionhas the right, but not the obligation, to exercise it. He will only exercise it if the currencymoves in a favorable direction. Thus, once you have paid for an option, you cannotlose, unlike a forward contract, where you are obliged to exchange the currenciesand therefore will lose if the movement is unfavorable. The disadvantage of an option contract, compared to a forward or futures contractis that you have to pay a price for the option, and this price or premium tends to bequite high for certain options. In general, the option’s price will be higher the greaterthe risk to the seller (and the greater the value to the buyer because this is a zero-sumgame). The risk of a call option will be greater, and the premium higher, the higherthe forward rate relative to the exercise price; after all, one can always lock in a profitby buying at the exercise price and selling at the forward rate. The chance that theoption will be exercised profitably is also higher, the more volatile is the currency, andthe longer the option has to run before it expires. Returning to Richard May in his Rockefeller Center office, we find that he has beenprinting spot, forward and currency options, and futures quotations from the company’sBloomberg terminal. The option prices are quoted in U.S. cents per euro. Yen are quoted in hundredthsof a cent. Looking at these prices, Richard realizes that he can work out how muchthe euro or yen would have to change to make the option worthwhile. Richard makesa mental note that ADG can typically borrow in the Eurocurrency market at LIBOR +1% and lend at LIBID. “I’ll attach these numbers to my memo,” mutters May, but the truth is he has yetto come to grips with the real question, which is when, if ever, are currency options abetter means of hedging exchange risk for an international firm than traditional forwardexchange contracts or future’s contracts. Please assist Mr. May in his analysis of currency hedging for his report to ADG’sFinance Committee. In doing so, you may consult the highlighted market quotes below.

It is Tuesday afternoon, February 14, 2012. Richard May, Assistant Treasurer atAmerican Digital Graphics (ADG), sits in his office on the thirty-fourth floor of thebuilding that dominates Rockefeller Plaza’s west perimeter. It’s Valentine’s Day, andRichard and his wife have dinner reservations with another couple at Balthazarat 7:30. I must get this hedging memo done, thinks May, and get out of here. Foreignexchange options? I had better get the story straight before someone in the FinanceCommittee starts asking questions. Let’s see, there are two ways in which I can envisionus using options now. One is to hedge a dividend due on September 15th fromADG Germany. The other is to hedge our upcoming payment to Matsumerda for theirspring RAM chip statement. With the yen at 78 and increasing I’m glad we haven’tcovered the payment so far, but now I’m getting nervous and I would like to protectmy posterior. An option to buy yen on June 10 might be just the thing. Before we delve any further into Richard May’s musings, let us learn a bit aboutADG and about foreign exchange options. American Digital Graphics is a $12 billionsales company engaged in, among other things, the development, manufacture, andmarketing of microprocessor-based equipment. Although 30 percent of the firm’ssales are currently abroad, the firm has full-fledged manufacturing facilities in onlythree foreign countries, Germany, Canada, and Brazil. An assembly plant in Singaporeexists primarily to solder Japanese semiconductor chips onto circuit boards and toscrew these into Brazilian-made boxes for shipment to the United States, Canada,and Germany. The German subsidiary has developed half of its sales to France, theNetherlands, and the United Kingdom, billing in euros. ADG Germany has accumulateda cash reserve of €900,000, worth $1,178,100 at today’s exchange rate. Whilethe Hamburg office has automatic permission to repatriate €3 million, they have beenurged to seek authorization to convert another €1 million by September 15th. Thefirm has an agreement to buy three hundred thousand RAM chips at ¥8000 eachsemi-annually, and it is this payment that will fall due on June 10th.The conventional means of hedging exchange risk are forward or future contracts.These, however, are fixed and inviolable agreements. In many practical instances thehedger is uncertain whether foreign currency cash inflow or outflow will materialize.In such cases, what is needed is the right, but not the obligation, to buy or sell adesignated quantity of a foreign currency at a specified price (exchange rate). This isprecisely what a foreign exchange option provides. A foreign exchange option gives the holder the right to buy or sell a designatedquantity of a foreign currency at a specified exchange rate up to or at a stipulateddate. The terminal date of the contract is called the expiration date (or maturity date).If the option may be exercised before the expiration date, it is called an Americanoption; if only at the expiration date, a European option. The party retaining the option is the option buyer; the party giving the option isthe option seller (or writer). The exchange rate at which the option can be exercisedis called the exercise price or strike price. The buyer of the option must pay the sellersome amount, called the option price or the premium, for the rights involved. The important feature of a foreign exchange option is that the holder of the optionhas the right, but not the obligation, to exercise it. He will only exercise it if the currencymoves in a favorable direction. Thus, once you have paid for an option, you cannotlose, unlike a forward contract, where you are obliged to exchange the currenciesand therefore will lose if the movement is unfavorable. The disadvantage of an option contract, compared to a forward or futures contractis that you have to pay a price for the option, and this price or premium tends to bequite high for certain options. In general, the option’s price will be higher the greaterthe risk to the seller (and the greater the value to the buyer because this is a zero-sumgame). The risk of a call option will be greater, and the premium higher, the higherthe forward rate relative to the exercise price; after all, one can always lock in a profitby buying at the exercise price and selling at the forward rate. The chance that theoption will be exercised profitably is also higher, the more volatile is the currency, andthe longer the option has to run before it expires. Returning to Richard May in his Rockefeller Center office, we find that he has beenprinting spot, forward and currency options, and futures quotations from the company’sBloomberg terminal. The option prices are quoted in U.S. cents per euro. Yen are quoted in hundredthsof a cent. Looking at these prices, Richard realizes that he can work out how muchthe euro or yen would have to change to make the option worthwhile. Richard makesa mental note that ADG can typically borrow in the Eurocurrency market at LIBOR +1% and lend at LIBID. “I’ll attach these numbers to my memo,” mutters May, but the truth is he has yetto come to grips with the real question, which is when, if ever, are currency options abetter means of hedging exchange risk for an international firm than traditional forwardexchange contracts or future’s contracts. Please assist Mr. May in his analysis of currency hedging for his report to ADG’sFinance Committee. In doing so, you may consult the highlighted market quotes below.





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EXHIBIT 8.13 Spot Exchange Rates Currency Group 02/14/12 Key Cross Currency Rates – Majors Rate: Spot Monitor: Last Price Source: BGN Bloomberg BGN(NY) USD EUR JPY GBP CHF CAD AUD NZD HKD NOK SEK SEK 6.7062 8.7768 .08545 10.500 7.2701 6.6934 7.1352 5.5546 .86496 1.1662 NOK 5.7505 7.5260 .07327 9.0038 6.2341 5.7396 6.1184 4.7631 .74170 .85749 HKD 7.7531 10.147 .09879 12.139 8.4052 7.7384 8.2492 6.4218 1.3483 1.1561 1.5801 .01538 1.2301 .01198 1.8903 1.4716 1.3113 .01277 1.5687 1.0862 .18003 .14015 NZD 1.2073 .93987 1.3088 1.2050 1.2846 15572 .20995 AUD 1.0189 .93809 .77848 .12122 .16344 CAD 1.0019 1.0660 82986 .12923 .17423 .14940 CHF .92243 1.2072 .01175 1.4443 .92068 .98144 76403 .11897 .16041 .13755 .09524 GBP JPY 78.479 102.71 EUR USD .63868 .83588 .00814 .69239 .63746 .67954 .52901 .08238 .11106 122.88 85.078 78.330 83.500 65.003 10.122 13.647 11.702 1.1963 1.5657 .82834 1.0841 76408 .00974 .76263 .99810 1.0640 .82829 .81296 .63288 .09855 .13287 .12898 .17390 .11394 .14912 1.3088 01274 EXHIBIT 8.14 Forward Exchange Rates Currency Group Key Cross Currency Rates - Majors 02/14/12 Rate: 4 Month Monitor: Outrights Source: BGN Bloomberg BGN(NY) USD EUR JPY GBP CHF CAD AUD NZD HKD NOK SEK SEK 6.7042 8.7760 .08542 10.497 7.2692 6.6924 7.1355 5.5526 .86471 1.1661 NOK 5.7494 7.5262 .07326 9.0022 6.2339 5.7393 6.1193 4.7618 .74156 .85758 1.1565 HKD 7.7531 10.149 .09879 12.140 8.4065 7.7395 8.2520 6.4214 1.3485 NZD 1.2074 1.5805 .01538 1.8905 1.3091 1.2053 1.2851 .15573 .21000 .18010 16342 .17424 AUD .93955 1.0018 1.2299 .01197 1.4711 1.3113 .01276 1.5685 1.0187 1.0862 .93790 .77816 .12118 .12921 .14014 .14942 CAD 1.0662 .82969 CHF GBP JPY 78.482 102.74 .92228 1.2073 .01175 .63867 1.4441 .92066 .98162 .76386 .69249 .63754 .67976 .52896 .08237 .11896 .16041 .11108 .13757 .83604 .00814 .09526 122.88 85.096 78.344 83.532 65.001 1.1961 13.650 .82830 .76258 .81307 .63270 .09853 .13287 10.123 11.706 .11395 1.3090 01274 1.5658 1.0843 99824 1.0643 82823 .12898 .17393 .14916 EUR .76392 .00973 USD Currency Group Key Cross Currency Rates - Majors 02/14/12 Rate: 7 Month Monitor: Outrights Source: BGN Bloomberg BGN(NY) USD EUR JPY GBP CHF CAD AUD NZD HKD NOK SEK SEK 6.7045 8.7761 .08543 10.497 7.2694 6.6926 7.1355 5.5528 .86472 1.1661 NOK 5.7495 7.5261 .07326 9.0021 6.2339 5.7394 6.1192 4.7619 .74155 .85757 HKD 7.7534 10.149 .09879 12.139 8.4066 7.7397 8.2518 6.4215 1.3485 1.1564 1.2074 .93959 1.2299 .01197 1.3091 1.0188 .93794 NZD 1.5805 .01538 1.8904 1.2053 1.2850 .15573 .21000 .18009 AUD 1.4711 .77820 .12119 .16342 .14014 CAD CHF 1.0018 .92229 1.3113 .01276 1.5685 1.2073 .01175 1.4440 1.0862 1.0662 .82969 .12920 .17423 .14942 .92066 .98159 .76387 .11895 .13756 .09526 .16041 GBP .63869 .83604 .00814 .69250 .63756 .67975 52898 .08238 .11109 JPY EUR 78.484 102.73 122.88 85.096 78.345 83.529 65.002 10.123 13.650 11.706 .11395 .14915 76394 .00973 1.1961 .82831 .76260 .81306 .63272 .09853 .13287 USD 1.3090 .01274 1.5657 1.0843 .99824 1.0643 .82823 .12898 .17393 EXHIBIT 8.15 Money Market Rates EURO MONEY RATES SECURITY TIME BID ASK CHANGE HIGH LOW PRV CLS DEPOSIT RATES 17:01 13:59 .1500 .2750 2) EUDRIT -0/N 3) EUDR2T -T/N 4) EUDR3T -S/N 5) EUDRIZ -1WK 6) EUDR2Z -2WK 7) EUDR3Z -3WK 8) EUDRA -1 MO 9) EUDRB -2MO 10) EUDRC -3MO 11) EUDRD -4MO 12) EUDRE -5MO 13) EUDRF -6MO 14) EUDRG -7MO 15) EUDRH -8MO 16) EUDRI -9MO 17) EUDRJ -10MO 18) EUDRK -11MO 19) EUDR1 .1000 .3500 +.0750 4500 2800 .1450 .2250 .4000 .4000 .3700 .5000 .5000 .5700 .7200 1.0000 1.1100 .1500 20:00 12:32 +.0250 +.0350 .1500 .3000 .1450 .3000 .2500 .3200 .2500 .3000 4500 .6000 .9500 .3100 .3750 .4100 .4450 5000 20:00 .2200 20:00 .2700 .4000 16:23 -.0600 .7200 .5100 .5700 20:00 19:59 .7100 1.1000 .6550 .9600 .6600 .9750 1.1050 1.0600 1.1800 1.2900 19:59 -.0200 1.1550 1.0650 -.0100 -.0100 -.0100 -.0100 -.0100 19:59 1.2300 1.3500 1.1700 1.2150 1.3250 19:59 19:59 1.3400 1.3700 1.3000 1.3500 1.4200 1.4000 1.4700 1.5300 1.3650 1.4350 1.4600 1.3850 19:59 1.5250 1.4550 1.5150 19:59 1.4800 1.6500 1.4900 19:59 1.5400 1.5900 1.5900 -.0100 1.6400 1.5650 1.5750 19:59 1.6500 -.0100 1.6950 1.5900 1.6300 -1YR 20:00 1.6500 1.7100 -.0100 1.8000 1.6500 1.6900 JAPANESE YEN MONEY RATES SECURITY LAST CHANGE TIME PREVIOUS BID ASK DEPOSITS 2) O/N 3) T/N 4) S/N 5) 1 Week 6) 2 Week 7) 3 Week 1 Month .0010 .0850 6:01 19:59 7:28 .0010 .0850 .0010 .0100 0010 .1600 .0800 .0300 .0300 .0800 .1550 .1550 .2300 19:59 .1050 .1050 .1800 .1800 .1800 .1050 .1050 .1300 19:59 19:58 .1300 .1050 .1300 .1700 .2100 19:59 19:59 19:59 19:59 19:59 .0600 .1000 .1400 .1500 8) 9) 2 Month 3 Month .1050 .1300 .1600 10) 11) 4 Month 12) 5 Month 13) 6 Month 14) 7 Month 15) 8 Month 16) .1700 .2000 2400 .2900 3400 .3900 .2100 .1800 .2300 .2600 .2600 .3100 .3600 19:59 19:59 .3100 .3600 .2800 .3300 .4000 .4500 .4800 19:59 19:59 4000 .3700 .4300 .4800 9 Month 17) 10 Month 18) 11 Month 19) 1 Year 4500 .4800 5000 .4200 4500 19:59 19:59 .5100 .4700 .5000 .5000 .5300 .5600 .5300 19:59 5300 |||||| EXHIBIT 8.15 Money Market Rates (continued) USD MONEY MARKET RATES SECURITY TIME BID ASK CHANGE HIGH LOW PRV CLS Fed Funds 2) FDFD Deposit Rates 4) O/N 5) USD Depo T/N 6) USD Depo S/N 7) USD Depo 1 WK 8) USD Depo 2 WK 9) USD Depo 3 WK 10) USD Depo 1 Mo 11) USD Depo 2 Mo 12) USD Depo 3 Mo 13) USD Depo 4 Mo 14) USD Depo 5 Mo 15) USD Depo 6 Mo 16) USD Depo 7 Mo 17) USD Depo 8 Mo 18) USD Depo 9 Mo 19) USD Depo 10 Mo 20) USD Depo 11 Mo 15:49 .11000 .14000 .23000 .09000 .12000 19:59 14:23 .0800 .1300 .0800 .1000 .1200 1800 2900 .1300 .1350 .1300 .1500 .1690 .1400 .2050 2800 .1300 .2500 2000 .1800 -.0500 .2000 .1300 .1500 .1700 20:00 .1600 19:59 .2000 .2300 20:00 2200 3000 .1300 .1700 2300 .2400 3600 20:00 .2450 .1800 20:00 20:00 3950 .8250 .2050 3300 .3000 20:00 20:00 4600 5700 .5100 6200 .8750 .3700 4850 .5950 .6750 .7550 .7108 .5631 .6500 .7300 7800 .7000 20:00 19:24 .7584 .6203 .4550 .7351 .7800 1.3550 20:03 8300 -.0100 1.6300 1.6300 .7919 .8548 8706 20:00 .8300 .8800 .9116 .8550 -.3750 20:01 20:00 .8800 .9300 1.8300 .9800 1.3550 1.0771 1.7300 .9550 1.0150 20:00 .9900 1.0400 1.1213 .9222 EXHIBIT 8.16 Currency Futures View: Futures EURO FX CURR FUT Chicago Mercantile E Delayed Futures 2) Chart on CCRV Pricing Date: 02/14/12 COMB 1) Edit Columns Contact Table Sort By: Expiration Contracts: 6/6 Ager Volume: 268379 Aggr Open Int: 286579 Ticker Last Change Time Bid Ask Open Int Volume Previous 267388 3) ЕCH2 4) ЕСM2 5) ECU2 6) ECZ2 7) ЕCH3 8) ECM3 20:26 1.3089 1.3090 281213 1.3097 Mar12 1.3090 -.0115 1.3205 Jun 12 Sep 12 Dec 12 1.3096 20:25 1.3095 5261 973 1.3210 1.3217 -.0114 1.3110 s -.0107 -.0103 1.3107 20:10 1.3098 81 12 1.3121 s 1.3132 s 1.3141 s -.0102 20:10 1.1800 16 6. 1.3224 Mar 13 Jun 13 -.0103 20:10 8. 1.3235 20:10 1.3243 View: Futures JPN YEN CURR FUT Chicago Mercantile E Delayed Futures 1) Edit Columns Contact Table 2) Chart on CCRV Pricing Date: 02/14/12 COMB Sort By: Expiration Display: Quoted Val. Aggr Open Int: 162112 Volume Previous Contracts: 6/6 Aggr Volume: 106781 Ticker Change Bid Last Time Ask Open Int 3) JYH2 4 JYM2 5) JYU2 6) JYZ2 7) JYH3 8) JYM3 Mar 12 127.47 -1.39 20:27 127.46 127.47 160202 106024 128.86 Jun 12 Sep 12 Dec 12 127.59 -1.40 20:24 127.59 127.62 1882 753 128.99 127.79 s -1.38 -1.38 20:10 127.53 128.08 18 129.17 128.01 s 20:10 125.30 10 129.39 -1.39 -1.39 Mar 13 128.32 s 128.64 s 20:10 20:10 129.71 Jun 13 130.03 EXHIBIT 8.17 Currency Options XEC Curncy ECU SPOT USD STD Calc Mode 95) Templates f131.08 -80 -.61% 96) Actions HI 131.80 97) Explry Lo 131.80 Strike 5 Impled Vols (OMON) HV 10.21 91) News Center 131.00 Exch NASDAQ OM Calls Puts Ticker Bld Ask Last IVM DM Volm alnt Strike Ticker Bid Ask Last IVM DM Volm Qlnt 16 Jun 12 (123d); CSize 100; R0.12 5 16 Jun 12 (123d): CSize 100; R0.12 11) XEM2C C 4.07 4.33 5.00y 12.03 56 12) XEM2C C 3.79 4.02 13) XEM2C C 3.51 3.74 4.20y 11.83 52 14) XEM2C C 3.25 3.47 15) XEM2C C 2.99 3.22 41) XEM2P C 3.10 3.27 3.10 12.25 -44 10 953 18 346 130 .54 130.5 42) XEM2P C 3.32 3.47 5.18y 12.15 -46 131 11.91 1. 43) XEM2P C 3.55 3.69 3.56 12.06 -48 1 11.73 .49 131.5 44) XEM2P C 3.78 3.92 4.94y 11.95 -.50 135 8. 11.62 .47 45) XEM2P C 4.02 4.16 5.48y 11.85 -53 22 Sep 12 (221d); CSize 100; R 0.12 22 Sep 12 (221d); CSize 100; RO.12 46) XEU2P C 4.03 4.28 47) XEU2P C 48) XEU2P C 49) XEU2P C 50) XEU2P C 5.84 6.06 12.76 .58 16) XEU2C C 6.10 6.44 17) XEU2C C 5.52 5.82 5.88y 12.58 .55 18) XEU2C C 4.97 5.25 19) XEU2C C 4.45 4.73 20) XEU2C C 3.94 4.21 129 12.75 -42 130 131 4.44 4.67 4.69y 12.59 -45 4.89 5.09 5.04y 12.43 -48 5.35 5.56 7.00y 12.26 -51 12.09 -.54 242 12.43 .52 35 132 133 12.31 .49 123 12.11 46 22 Dec 12 (312d); CSize 100; R0.12 22 Dec 12 (312d); CSize 100; R 0.12 21) XEZ2C C 7.07 7.54 12.88 .58 129 51) XEZ2P C 4.95 5.44 12.97 -42 22) XEZ2C C 6.50 6.95 23) XEZ2C C 5.96 6.38 24) XEZ2C C 5.44 5.85 25) XEZ2C C 4.93 5.35 12.74 55 12.62 53 130 131 52) XEZ2P C 5.37 5,82 5.55y 12.81 -45 53) XEZ2P C 54) XEZ2P C 6.28 6.71 8.07y 12.51 -50 55) XEZ2P C 6.76 7.20 10 5.82 6.25 12.66 -47 12.48 50 132 12.35 47 133 12.37 -.53 18 Feb 12 (4d); CSize 100; R 0.12 18 Feb 12 (4d); CSize 100; RO.12 26) XEG2C C 1.94 2.12 2.22 7.38 27) XEG2C C 1.15 1.30 1.33 10.44 .76 56) XEG2P C 57) XEG2P C 25y 14.28 -.15 .21 13.18 -.20 1 98 129 130 10 .20 15 .25 .39 162 LII I XEC Curncy JAPAN V SPOT USD STD 95) Templates 4127.43 -1.48 -1.15% 96) Actions HI 128.20 97) Explry Lo 127.33 Implled Vols (OMON) HV 6.87 91) News Calc Mode Center 127.41 Strike 5 Exch NASDAQ OM Calls Puts Ticker Bld Ask Last IVM DM Volm alnt Strike Ticker Bld Ask Last IVM DM Volm Qlnt 16 Jun 12 (123d); CSize 100; R 0.12 5 16 Jun 12 (123d): CSize 100; R 0.12 1) XNM2C C 3.09 3.40 2) XNM2C C 2.82 3.11 3) XEM2C C 2.57 2.84 4) XEM2C C 2.33 2.57 5) XEM2C C 2.10 2.35 9.31 57 126.5 31) XNM2P C 2.02 2.25 32) XNM2P C 2.25 2.47 127.5 33) XNM2P C 2.48 2.71 34) XNM2P C 2.73 3.00 128.5 35) XNM2P C 3.00 3.28 8.78 -43 127 9.26 .54 9.23 .51 8.77 -46 8.73 -49 1 9.17 48 128 8.75 -.52 9.16 45 8.74 --55 22 Sep 12 (221d); CSize 100; R0.12 36) XNU2P C 2.47 2.85 3.10y 9.65 -.38 37) XNU2P C 2.89 3.26 2.59y 9.61 -42 38) XNU2P C 3.35 3.69 39) XNU2P C 3.85 4.24 40) XNU2P C 4.40 4.80 22 Sep 12 (221d); CSize 100; R 0.12 5. 10.51 .61 6) XNU2C C 5.22 5.74 7) XNU2C C 4.66 5.12 8) XNU2C C 4.14 4.55 9) XNU2C C 3.67 4.02 10) XNU2C C 3.20 3.58 125 10 10.42 .57 10.36 .54 126 127 10 9.54 -46 10.32 .50 128 9.57 -51 10.30 46 129 9.57 -.55 22 Dec 12 (312d); CSize 100; RO.12 22 Dec 12 (312d); CSize 100; R 0.12 41) XNZ2P C 3.30 3.04 42) XNZ2P C 3.74 4,24 11) XNZ2C C 6.29 6.90 12) XNZ2C C 5.73 6.29 13) XNZ2C C 5.21 5.74 14) XNZ2C C 4.74 5.24 15) XNZ2C C 4.28 4.77 11.24 .60 125 10.17 -40 11.17 57 11.09 54 126 10.11 -43 43) XNZ2P C 4.20 4.70 44) XNZ2P C 45) XNZ2P C 127 10.06 -46 11.08 51 128 4.70 5.19 10.01 -50 11.05 48 129 5.23 5.73 9.98 -.53 18 Feb 12 (4d); CSize 100; R0.12 18 Feb 12 (4d); CSize 100; R0.12 16) XNG2C C 2.34 2.60 17) XNG2C C 1.42 1.66 12.79 .92 10.97 .84 125 46) XNG2P C 47) XNG2P C 16 16.92 -14 126 .01 .25 11.02 -.17 IIIL IIIII II II

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4.99

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