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# P2.T5. Jorion - VAR mapping - currency futures - Practice question number 19 on page 57

#### Amns233

##### New Member
Hi,

I didn't understand the calculation of total proceeds.

Question:
A U. S. exporter anticipates receiving 1 million British pounds in 3 months. This is hedged with a short position in BP futures expiring in 6 months. The initial spot and futures prices are $1.5000 and$1.4703. At the time the hedge is lifted, the respective prices are $1.4000 and$1.3861. Ignoring the daily marking to market, what are the total proceeds to the exporter?

This is [$1.4−($1.3861−$1.4703)]×H!1,000,000=$1,484,200.

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#### David Harper CFA FRM

##### David Harper CFA FRM
Staff member
Subscriber
Hi @Amns233 The initial hedge is a short position in the futures contract with F(0) = $1.4703. So initially, the exporter's exposure is a plan to receive 1.0 pounds in +3 months at the then-prevailing spot FX rate, hedged by the short position. When the hedge is lifted: • The 1.0 million pounds are received and converted to US at the spot: GPBUSD$1.40 * 1.0 million GBP
• The short position is closed for a gain: ($1.4703 -$1.386) * 1.0 mm ; i.e., in base/quote terms GPBUSD $1.4703 to$1.386 is depreciation in GBP (appreciation in USD, as few dollars needed to buy 1.0 unit of GPB) so the future transaction is profitable.
So the exposure (i.e., future receipt) plus the hedge net to: [$1.40 + ($1.4703 - \$1.386)] * 1.0 mm. Thanks,

#### Amns233

##### New Member
Thanks David. Have the materials been updated/changed recently? It's because I don't see the PDF having 57th page, there are in total only 49 pages now. I don't even see that question now.

#### Nicole Seaman

##### Director of FRM Operations
Staff member
Subscriber
Thanks David. Have the materials been updated/changed recently? It's because I don't see the PDF having 57th page, there are in total only 49 pages now. I don't even see that question now.
Hello @Amns233

David is correct above that the Jorion EOC questions have been removed so there are only 49 pages in the practice question set now. You will also find this with any other notes or practice question sets that may have included the author's EOC questions. Any changes that are made to our (BT's) practice questions will be noted on the updated materials link that David mentioned above.