Corporations involved in international business transactions may purchase ________ to hedge __________ denominated in a foreign currency.

Question

Corporations involved in international business transactions may purchase ________   to hedge __________ denominated in a foreign currency.

Quizplus · Accepted Answer

Currency put options allow corporations to sell a currency at a predetermined rate, which is useful for hedging future receivables in case the foreign currency depreciates. Currency call options allow them to buy a currency at a predetermined rate, useful for hedging future payables in case the foreign currency appreciates.

Corporations Involved in International Business Transactions May Purchase ________ to Hedge