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1. If the Swiss franc is expected to depreciate against the US Dollar in the near...

1. If the Swiss franc is expected to depreciate against the US Dollar in the near future, would a U.S.- based FI in Lausanne prefer to be net long or net short in its asset positions? Discuss.
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Answer #1

In the given problem it is given that Swiss Franc is expected to depreciate against the US dollars in the near future i.e. US dollars will appreciate against Swiss Franc, so the US based FI having dollars should go net long in its asset positions. This strategy can be explained as:-

Net long refers to a position in which an investor has more long positions than short positions in a given asset or a portfolio. Investor who are net long will benefit when the price of the asset increases (bullish situation). In this case as US dollars is expected to appreciate in future so the US based FI should go net long in order to earn profit.

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