Agnetha Poulsen works as an analyst in the foreign exchange overlay strategies department for CFN, a large asset management firm serving institutional clients. She is concerned about the excessive unhedged currency exposure taken on by the overlay strategies department. She makes an appointment with Alvilda Kristensen, director of risk management, to discuss this matter. Prior to the

meeting, Poulsen collects information on foreign currency quotes and on interest rates as shown in Exhibits 1 and 2.

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Exhibit 1: Current Spot and Forward Exchange Rate Quotes

Quotes USD/CHF USD/EUR

Spot 0.9817/0.9821 1.2235/1.2238

30-day forward 7.6/6.9 7.21/6.80

60-day forward 15.3/13.3 14.56/13.76

90-day forward 24.3/23.05 23.84/22.77

Exhibit 2: Selected Interest Rates

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Interest Rates USD EUR CHF

30-day rate 0.20% 0.91% 1.13%

60-day rate 0.21% 0.93% 1.15%

90-day rate 0.26% 1.04% 1.25%

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Poulsen also reviews the current open forward contracts. As an example, she reviews two contracts. Contract FX2001 is a 90-day forward contract initiated 60 days ago. The contract calls for purchase of CHF 200 million at an all-in rate of USD 0.9832. Contract FX2051 is a 90-day contract initiated 30 days

ago to purchase 100 million EUR at an all-in rate of 1.2242.

During her meeting with Kristensen, Poulsen expresses concern about traders establishing FX carry trades in several emerging market currencies. Kristensen assures Poulsen that CFN has adequate monitoring mechanisms. She continues that these carry trades have been generating significant positive returns for the clients and Poulsen should not worry about it. Kristensen further mentions that

the firms monitoring mechanisms trigger the sale of funding currency whenever volatility levels, implied by options on the investment currency, increase beyond a predetermined threshold.

What is the current mark-to-market value of the forward contract FX2051 in USD?

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