4. (a) You have a long open position, that is, you are expecting a future foreign currency inflow. Under what conditions

[answerhappygod]

4. (a) You have a long open position, that is, you are expecting
a future foreign currency inflow. Under what conditions would you
be indifferent between hedging this position via a forward
transaction and hedging it via the money markets if the position is
a foreign-currency accounts receivable that you would like to
finance? In other words, assume that you would like to borrow now
against the expected proceeds of the accounts receivable inflow
(sell forward and borrow against proceeds in domestic currency,
versus borrow foreign currency and sell the proceeds in the spot
market, etc.). (40 marks)
(b) Explain briefly how variable collateral and periodic
re-contracting can be used to reduce default risk in forward
markets. (20 marks)