Question: What does the term hedging mean? Why do companies elect to follow this strategy? Why would a company prefer a foreign currency option over a

  1. What does the term hedging mean? Why do companies elect to follow this strategy?
  2. Why would a company prefer a foreign currency option over a forward contract in hedging a foreign currency firm commitment? Why would a company prefer a forward contract over an option in hedging a foreign currency asset or liability?

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