Question: Texas Traders (or TT) is a US based firm that has negotiated deal to sell Texas beer to an importer in South Korea. The terms

Texas Traders (or TT) is a US based firm that has negotiated deal to sell Texas beer to an importer in South Korea. The terms of the deal are as follows:

Value of the deal: 750Billion Won

Payment terms (note: payment is to be made in Korean Won)

21% down payment, with the rest split equally over 125days and 260days.

Exchange rates: Spot (Bid, Ask): 0.000820.00085(direct quotes in the US).

125-day Forward Rates: 0.000780.00084

260-day Forward Rates: 0.000690.00072

Borrowing, Lending rates in Korean Won: 13.6%, 9.7%[125days], and 15.25%, 13.35% [260days]

Put and Call Options are available:

CALL: Strike price: 0.00080, option premium = 8%, American, expires in 280days.

PUT: Strike price: 0.00085, option premium = 24%, American, expires in 280days.

TT cost of capital: 10.25%

What is the best hedging method for TT?

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