Quote:
Originally Posted by dizbuster
I. If I remember correctly, it was only about 4/5 years ago that the us$/euro rate was 0.9 !!
I am not an expert in the fx options market but I don't think that options are quoted much over 2 years, so it would mean that airbus would have been "covering" theie costs by buying in more options as time went on and of course, as we have seen the rate has risen from 0.90 to 1.30 and this means that the cost of hedging has increased over the period as well.
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In Jan 2002 EUR/USD hit 0.8575.
Can quote FX options out to 30 years with relative ease - especially in majors as there is a yeild curve availbale out that far to price them up on. (Doubt there is anyone here who is interested in options pricing modelling - so I'll resist the urge to go into detail).
Airbus would have used currency swaps rather than options to hedge. Diz is right however that hedging further out does become more expensive.