Question: Suppose that Texas Instruments TI must pay a French supplier

Suppose that Texas Instruments (TI) must pay a French supplier €10 million in 90 days.
a. Explain how TI can use currency futures to hedge its exchange risk. How many futures contracts will TI need to fully protect itself?
b. Explain how TI can use currency options to hedge its exchange risk. How many options contracts will TI need to fully protect itself?
c. Discuss the advantages and disadvantages of using currency futures versus currency options to hedge TI's exchange risk.


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  • CreatedJune 27, 2014
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