-Hedging technique is often used for risk management. Explain various conditions where a US based MNC may buy a call option on British pound to hedge? Explain when this MNC may buy a put option on British pound to hedge?

-Speculation technique is often used for taking high risk with expectation of higher return. Explain various conditions where a US based speculator may buy a call option on British pound to speculate? Explain when this speculator may buy a put option on British pound to speculate?

-A US football team is scheduled to play a game in UK next year. All expenses will be paid by the British government, and the team will get paid 1 million British pounds. It is anticipated that the British pound will depreciate significantly by the time the team travels for the game. The deal has to be approved by NFL and NFL will take three months to approve or disapprove this deal. Explain how the team can hedge this position. If the team does not do anything to hedge the risk, what are the possible consequences?

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1 Hedging with options for risk management A Buying a call option on the British pound to hedge A USbased MNC may buy a call option on the British pound to hedge its position against the risk of a pot... View the full answer