Consider a firm in the DC that uses inputs from a supplier in the FC. To hedge the FX risk the FC firm could (select all that are true): Purchase a futures contract for DC to FC below your expected future trajectory of the FX rate and that the supply cotract is written in the DC Purchase a call option for FC to DC, which the firm will exercise if the spot FX rate (FC/DC) at the time is higher than the contract rate and the supply contract is written in the DC. Purchase a futures contract for FC to DC that you could sell for a profit if the DC weakens, which increases your costs of exporting the input Engage in a forward contract for DC to FC at today's spot rate, given that counter-party risk is managable and that the supply contract can be written in the DC. Exercise a futures contract for DC to FC if the strike price of the contract (FC/DC) is higher than the spot market rate at that time and that the supply contrtact can be written in the DC. Purchase a call option for DC to FC, which the firm will exercise if the spot FX rate (FC/DC) at the time is lower than the contract rate and the supply contract is written in the DC.
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Consider a firm in the DC that uses inputs from a supplier in the FC. To hedge the FX risk the FC firm could (select all that are true): Purchase a futures contract for DC to FC below your expected future trajectory of the FX rate and that the supply cotract is written in the DC Purchase a call option for FC to DC, which the firm will exercise if the spot FX rate (FC/DC) at the time is higher than the contract rate and the supply contract is written in the DC. Purchase a futures contract for FC to DC that you could sell for a profit if the DC weakens, which increases your costs of exporting the input Engage in a forward contract for DC to FC at today's spot rate, given that counter-party risk is managable and that the supply contract can be written in the DC. Exercise a futures contract for DC to FC if the strike
Purchase a call option for DC to FC, which the firm will exercise if the spot FX rate (FC/DC) at the time is lower than the contract rate and the supply contract is written in the DC.. |
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