Hedging With Currency Options. When would a U.S. firm consider purchasing a call
ID: 2653829 • Letter: H
Question
Hedging With Currency Options. When would a U.S. firm consider purchasing a call option on euros for hedging? When would a U.S. firm consider purchasing a put option on euros for hedging? Complete each sentence: A call option can hedge a firm's future _______ denomin-ated in euros. It effectively locks in the maximum price to be paid for euros. A put option on euros can hedge a U.S. firm's future ________ denominated in euros. It effectively locks in the minimum price at which it can exchange euros received.
Equity, net profit
Net profit, equity
Receivables, payables
Payables, receivables
Equity, net profit
Net profit, equity
Receivables, payables
Payables, receivables
Explanation / Answer
Payables, receivables
Explanation
In the call option hedge firm future payable denominate in euro.
In put option on euro hedge United State firm future Receivables denominate in euro.
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