When comparing the forward hedge to the options hedge, the MNC can easily determine which hedge is more desirable, because the cost of each hedge can be determined with certainty.

Question

Quizplus · Accepted Answer

The cost of a forward hedge is known with certainty, but the cost of an options hedge is uncertain and can depend on factors such as the volatility of the underlying asset and the strike price of the option. Therefore, it may be difficult for the MNC to determine which hedge is more desirable based solely on cost. Other factors such as the MNC's risk tolerance and market outlook may also come into play.

When Comparing the Forward Hedge to the Options Hedge, the MNC