What are the advantages and disadvantages to a U.S. corporation that uses currency options on euros rather
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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 might 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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A currency option on euros allows more flexibility since it does not commit one to pur...View the full answer
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