For the following scenarios, describe a hedging strategy using OPTIONS contracts. Discuss the reasons for your choice of contract. Using only OPTIONs CONTRACTS.
a) A public utility is concerned about rising costs.
b) A corn farmer fears that this year’s harvest will be at record high levels across the country.
c) A natural gas producer believes there will be excess supply in the market this year.
d) A bank derives all its income from long-term, fixed-rate residential mortgages.
e) A stock mutual fund invests in large, blue-chip stocks and is concerned about a decline in the stock market.
f) A U.S. exporter of construction equipment has agreed to sell some cranes to a German construction firm. The U.S. firm will be paid in euros in three months.