Question Details

Differentiate between a currency call option and a currency 



1. Currency Options. Differentiate between a currency call option and a currency put option.

2. Forward versus Currency Option Contracts. What are the advantages and disadvantages to a
U.S. corporation that uses currency options on euros rather than a forward contract on euros to
hedge its exposure in euros? Explain why an MNC use forward contracts to hedge committed
transactions and use currency options to hedge contracts that are anticipated but not committed.
Why might forward contracts be advantageous for committed transactions, and currency options
be advantageous for anticipated transactions?



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