If a firm planning to hedge receivables is certain of the future direction a spot rate will move, and requires a tailor-made hedge in terms of amount and maturity date, it should use a

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A forward contract would be the best choice for a tailor-made hedge, as it allows the firm to specify the exact amount and maturity date for the hedge. A futures contract may not offer the exact specifications required by the firm, and call or put options involve paying a premium and may not provide the desired amount of protection.

If a Firm Planning to Hedge Receivables Is Certain of the Future