--%>
Assignment Help - homework help

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?

E

Expert

Verified

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.

   Related Questions in Financial Accounting

  • Q : Drug maker-stymie generic competition

    Drug maker want to stymie generic competition. Elucidate this statement.

    		•
  • Q : Liability and Assets What are Liability

    What are Liability and Assets in Accounting equation. Also describe it with the help of formula.

    		•
  • Q : Progressives The progressives were

    The progressives were fascinated in “making people better.” What types of things were they fascinated in changing and who were they aiming their changes at?

    		•
  • Q : Balance Sheets & Income Statement

    Bio-Pure Food Company Gary Green has recently inherited some money and is interested in investing in a small company with some growth potential.  Last week he r

    		•
  • Q : Define Conspicuous Consumption

    Conspicuous Consumption: It is the phenomena of spending money on services and goods which are not required but keeping them gives you a high social status. Those things are kept mainly for the purpose of displaying and creating a false image of your

    		•
  • Q : Controlling the translation exposure It

    It is, normally, not possible to fully remove both the translation exposure and transaction exposure.  In some cases, eradication of one exposure will also eliminate the other.  However in other cases, removal of one exposure really creates the other. 

    		•
  • Q : Interest rate Give me answer of this

    Give me answer of this question. The prime interest rate usually: A) rises when the Federal funds rate rises. B) rises when the discount rate falls. C) falls when the Federal funds rate rises. D) falls when the Fed sells bonds in the open market

    		•
  • Q : Capital budgeting analysis imperative

    State why is capital budgeting analysis so imperative for the firm?

    		•
  • Q : What is forfaiting transaction What is

    What is meant by the forfaiting transaction?

    		•
  • Q : Modigliani-Miller equation In

    In Modigliani-Miller equation, why is market value of the levered firm is more than the market value of an equivalent unlevered firm?

    		•