Your firm is bidding on a large construction contract in a foreign country.This contingent exposure could best be hedged
A)with put options on the foreign currency.
B)with call options on the foreign currency.
C)both with put and call options on the foreign currency,depending upon the specifics ("the rest of the story").
D)with futures contracts.

Question

Quizplus · Accepted Answer

The best choice for hedging contingent exposure in a foreign country would depend on the specifics of the situation. However, a combination of both put and call options on the foreign currency could be useful as it allows for potential gains from currency fluctuations while limiting losses. Put options can provide protection against currency depreciation, while call options can benefit from currency appreciation. By using both, the firm can create a range in which they can operate without incurring significant losses while still taking advantage of market movements. However, it is essential to fully understand the risks and costs involved in using these financial instruments.

Your Firm Is Bidding on a Large Construction Contract in a Foreign