Currency options and forward contract as hedging tool
State some of the advantages of currency options contract as a hedging tool as compared with the forward contract?
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Main advantage of using the options contracts for hedging is that the hedger may decide whether to exercise the options upon observing the realized future exchange rate. Options thus provide a hedge against the ex post regret that forward hedger could have to suffer. Hedgers may eliminate the downside risk while retaining the upside potential.
This exercise does not require you to do any research, and does not require you to cite to any references or external materials. Do not include any constitutional arguments. Like many legal and policy questions
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